Alphabet's weak report pulled U.S. tech stocks down
technology stocks fell. DK's close was S&P 500 down 0.30%, Nasdaq down 1.38%, Dow down 0.25%, and Russell 2000 up 0.98%.
Easy version of DK's October 30 morning note. It is the prior U.S. session, not Friday's close. This is not investment advice.
In one line, Alphabet, Google's parent, missed expectations, and U.S. technology stocks fell. Worry also grew that money spent on AI might not come back as profit.
An index is a score made by putting many stock prices into one basket. DK's close was S&P 500 down ▼ 0.30%, Nasdaq down ▼ 1.38%, Dow down ▼ 0.25%, and Russell 2000 up ▲ 0.98%. Large technology stocks were weak. Lower Treasury yields, the price the U.S. government pays to borrow, helped smaller companies hold up.
Hospitals, real estate, staples, utilities, and banks rose. Information technology fell ▼ 1.2% and semiconductors 1.1%.
Alphabet fell ▼ 12.68% on a disappointing report, and brokers cut price targets. Microsoft fell 0.14% even though cloud growth was strong, because it planned a $25 billion corporate bond, a company debt note, the first in nine years. Meta rose ▲ 1.98% and Apple 1.49%.
Memory and storage were weak. Micron fell ▼ 4.96% and SanDisk 5.29%. Seagate rose 0.32%. Nvidia fell 0.81%, AMD 2.08%, and Broadcom 1.92%. Marvell crashed 13.25% on worry that buying Lumentum could require more money and new shares, which would dilute existing owners. Lumentum rose 0.68%.
Companies that rent AI computing fell. CoreWeave fell ▼ 4.99% and Nebius 5.65%. Software fell harder. ServiceNow fell 26.97% and Fortinet 20.24%. Salesforce fell 4.63%, Palo Alto Networks 3.58%, and CrowdStrike 2.06%.
Drugs were strong. Eli Lilly rose ▲ 6.56%. Revenue rose 39% from a year earlier to $24.4 billion, and the yearly revenue outlook rose from $91 billion to $92 billion. The yearly earnings-per-share outlook was cut. Merck rose ▲ 3.84%, Novo Nordisk 2.27%, and Moderna 4.00%.
Cars rose. Carvana jumped 15.78% as unit sales rose 39%. Ford rose 3.26% and GM 3.95%.
After hours, trading after the regular close, Amazon's revenue rose ▲ 12% to $201.9 billion, but the stock fell 7.34%. AWS revenue rose 39%, but the midpoint of next-quarter operating-profit guidance was 5% below the market's hope. The cash capital-spending outlook stayed about $220 billion, and 12-month free cash flow was a $42.4 billion deficit. Free cash flow is cash left after spending on equipment. A deficit means cash was short.
Intel's revenue rose ▲ 21% to $16.5 billion and adjusted earnings per share were $0.52, but a weak next-quarter outlook sent the stock down ▼ 23.13% after hours. The midpoint of next-quarter revenue and earnings-per-share guidance was 9% and 60% below forecasts, and gross margin could fall from 44.1% to 37.6%.
September PCE, a price gauge of what people actually bought, rose ▲ 3.6% from a year earlier and 0.5% in the month, matching forecasts. Core PCE, the same gauge without food and energy, rose 3.1% from a year earlier and 0.3% in the month. The Fed, the U.S. central bank, is comfortable near 2% a year, so this was still hot. Real disposable income fell 0.3%, and the saving rate was 3.8%.
Third-quarter growth was a 3.4% annual rate, above the 3.2% forecast. New jobless claims were 194,000, below the 199,000 forecast. The 2-year Treasury yield was 4.602%, the 10-year 4.937%, and the 30-year 5.298%. Gold futures fell 0.50%. This note's WTI print was $102, down 0.76%. That oil date is not the same as the next evening note.
Three lines to keep. Technology fell on Alphabet's report and AI spending worry. Drugs and cars, farther from that worry, rose. Inflation matched forecasts but was still high, and real household income fell.