Wall Street is feeling the downside of high expectations, as Microsoft and Meta drag US stock indexes lower despite delivering strong profits for the summer.
The S&P 500 was down 1.4 per cent in afternoon trading and on track for its worst day in nearly eight weeks, falling further from its record set earlier this month. The Dow Jones was down 242 points, or 0.6 per cent. The Nasdaq composite was 2.3 per cent lower and heading for a second straight loss after setting its latest all-time high.
Wall Street was underwhelmed by the results of Meta and Microsoft.Credit: AP
The Australian sharemarket is set to retreat, with futures at 4.55am AEDT pointing to a fall of 60 points or 0.7 per cent, at the open. The ASX lost 0.3 per cent on Thursday.
Microsoft reported bigger profit growth for the latest quarter than analysts expected. Its revenue also topped forecasts, but its stock nevertheless sank 5.3 per cent as investors and analysts scrutinised for possible disappointments. Many centred on Microsoft’s estimate for upcoming growth in its Azure cloud-computing business, which fell short of some analysts’ expectations.
The parent company of Facebook, meanwhile, likewise served up a better-than-expected profit report. As with Microsoft, though, that wasn’t enough for the stock to rise. Investors focused on Meta Platforms’ warning that it expects a “significant acceleration” in spending next year as it continues to pour money into developing artificial intelligence. It fell 4 per cent.
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Both Microsoft and Meta Platforms have soared in recent years amid a frenzy around AI, and they’re entrenched among Wall Street’s most influential stocks. But such stellar performances have critics saying their stock prices have simply climbed too fast, leaving them too expensive. It’s difficult to meet everyone’s expectations when they’re so high, and Microsoft and Meta were both among Thursday’s heaviest weights on the S&P 500.
The next two companies in the highly influential group of stocks known as the “Magnificent Seven” to deliver their latest results will be Apple and Amazon. They’re set to report after trading ends for the day, and both fell at least 1 per cent on Thursday.
Earlier this month, Tesla and Alphabet kicked off the Magnificent Seven’s reports with results that investors found impressive enough to reward with higher stock prices. The lone remaining member, Nvidia, will report its results later this earnings season, and its 4.3 per cent drop was Thursday’s heaviest weight on the market after Microsoft.
