S&P 500, Nasdaq slide as Meta, Microsoft fall on spending concerns

NEW YORK: The S&P 500 and Nasdaq dropped on Thursday, as Meta and Microsoft fell on worries over surging AI spending, rattling investors already anxious about the US Federal Reserve’s pace of monetary policy easing.

Meta plunged 11.8 percent and was set for its biggest percentage drop in three years after the Instagram-parent forecast “notably larger” capital expenses next year, thanks to investments in artificial intelligence.

Microsoft dipped 3.5 percent after the tech giant reported a record capital expenditure of nearly USD35 billion for its fiscal first quarter and warned that spending would rise this year.

“We’re having a reset given the high expectations for the Fed and tech earnings were both called into question overnight,” said Ben Laidler, head of equity strategy at Bradesco BBI.

The pullback comes after the three major indexes notched record highs in the past four sessions, lifted by strong quarterly earnings and growing expectations of a more accommodative monetary policy stance.

On Wednesday, stocks got an extra lift after AI chip designer Nvidia became the first publicly listed company to surpass USD5 trillion in market capitalization.

Of the 222 S&P 500 companies that have reported so far, 84.2 percent have beaten earnings estimates as of Wednesday, according to LSEG data. That’s above the 77 percent average over the past four quarters.

Investor focus is now on results from fellow “Magnificent Seven” members Apple and Amazon, which are due after the closing bell.

Google-parent Alphabet jumped 4.9 percent as steady growth in the advertising business and cloud computing powered better-than-expected results.

Optimism around AI has been a key driver of the bull run in US stocks this year, with the top tech companies collectively accounting for 35 percent of the weight of the S&P 500.

At 11:48 a.m., the Dow Jones Industrial Average rose 190.04 points, or 0.40 percent, to 47,822.04, the S&P 500 lost 34.43 points, or 0.50 percent, to 6,855.82 and the Nasdaq Composite lost 272.88 points, or 1.14 percent, to 23,685.59.

The Federal Reserve delivered a widely expected quarter-point rate cut on Wednesday, but it also raised doubts over future policy action by saying another cut in December was not a “foregone conclusion”