S&P 500 Falls 1.8%, Posts Worst Session Since June Amid AI Concerns
Key Facts
The S&P 500 fell 1.8% on Friday, October 30, in its worst session since June, and ended its third consecutive losing week, according to the Associated Press. The index closed at 7,580.07 points, down 140.32 points, the news agency said. EL7 data recorded a close of 7,553.16 points on the same day, compared with 7,720.39 points on October 29. The two sources report different closing readings, so the 7,580.07 figure is attributed to the Associated Press and the 7,553.16 figure to EL7 data. The news agency said the sell-off came amid concerns that investor enthusiasm for artificial intelligence had pushed share prices to levels higher than expected returns could justify.
The decline extended to other major indexes, with the Nasdaq Composite losing 2.9% and the Dow Jones Industrial Average falling 572 points, or 1.1%, according to the Associated Press. Pressure was concentrated in technology and AI stocks, as investors questioned whether companies would generate enough profit and productivity to justify the scale of their investments. Portfolio manager Joe Tigay said AI trading was moving from the "hopes and dreams stage" to the "show-me stage." The shift reflects a change in market focus from the technology's potential to the returns companies can demonstrate after spending. Investment strategist Marta Norton said AI concerns were "persistent, and perhaps growing," as investors continued to digest company results released during the week.
Nvidia was the biggest drag on the S&P 500, falling 4.2% and outweighing the impact of Intel, according to the Associated Press. Intel shares fell 28.6%, their steepest drop since 1974, despite the company reporting stronger-than-expected quarterly earnings. The decline came after the company forecast fourth-quarter earnings below analysts' estimates. The moves in the two stocks show how concerns about returns on AI spending converged with investor disappointment over the outlook from a major company in the sector. A day earlier, Alphabet shares fell more than 12% after quarterly results raised investor concerns about the company's data center spending, according to Reuters.
Despite the session's losses, the S&P 500 was up about 1% in October and more than 12% year to date through October 30, according to Reuters. Earnings for S&P 500 companies were on track to rise 31% in the third quarter, with about half of the companies having reported, according to data cited by the news agency. That put the decline in a week of strong reported earnings, but did not dispel investor concerns about the cost of expanding AI and its commercial returns. Reuters said investors were bracing for a busy week that could test the market again, with midterm elections, company results and the monthly jobs report. Technology companies expected to report include Apple, AMD and Palantir.
In economic data, the Chicago Purchasing Managers' Index remained above the 50 level that typically signals expansion, although it fell from the previous month. This means the lower reading does not by itself indicate a contraction in activity, as the index remained in expansion territory for a second month, according to the index data. The following week, the U.S. October jobs report was scheduled for Friday, and Reuters said it would provide an important reading on the health of the U.S. economy. The report was due amid a crowded schedule of company results and midterm elections, factors the news agency said would present investors with another test. Markets will also focus on what technology companies' results reveal about spending and returns tied to the expansion of artificial intelligence.