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Live Market Updates: Nasdaq Composite Plunges After Tech Earnings | SMCI, NVDA, MSFT, MPWR
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Major Sell Off in Thursday Trading
2:45 pmAs of 2:45 p.m. ET, today’s trading has turned into a major sell-off.
Microsoft (Nasdaq: MSFT) is now down 5.39% on the day, which is on pace for its worst day in two years.
Meta (Nasdaq: META) is down 4.58% after earnings. NVIDIA (Nasdaq: NVDA) has dropped 4.91%.
Semiconductors in general are struggling today. After excellent earnings last week, ON Semiconductor (Nasdaq: ON) is down 5.6%. ARM Holding (Nasdaq: ARM) is down 8.9%.
The big question heading into the end of the trading week is whether this is a larger rotation out of AI and semiconductor stocks or a one-day blip.
Inflation Stays Muted
11:21 amThe biggest economic release today was inflation data from the Commerce Department. The number to watch was the PCE reading, which is the primary metric the Federal Reserve uses for gauging inflation growth.
The PCE came in at a 12-month inflation rate of 2.1%. That’s very close to the Fed’s targeted 2% level. If inflation continues to trend near 2%, it gives additional ammunition for future rate cuts.
S&P 500 Biggest Losers
11:11 amBeyond technology stocks, there are a number of well-known companies that are taking it on the chin today. Let’s look at a few of the more notable losers.
- Huntington Ingalls Industries (NYSE: HII): Is down 24% today. The shipbuilder issued revenue guidance at the lower end of prior projections and blamed uncertainty surrounding submarine contracts for the shortfall. The stock currently trades for just 10 times earnings.
- Estee Lauder (NYSE: EL): Another casualty of earnings season. The company’s stock is down 18% today after it slashed its dividend and issued disappointing guidance.
- Aptiv (NYSE: APTV): Dropped 17% in early trading after revenue of $4.9 billion fell well below estimates of $5.2 billion. Companies in the automotive supply chain continue to see choppy results this earnings season.
Other notable stocks that are down big today include: MGM Resorts (down 11%), Uber Technologies (Down 10.6%), and eBay (down 8.2%).
S&P 500 Winners Today
10:51 amIt’s earnings season, so stocks are making big moves in both directions today. Let’s look at some of the day’s biggest winners in the S&P 500.
Winners:
- Paycom Software (NYSE: PAYC) : Up 24% today thanks to impressive fourth-quarter earnings guidance.
- International Paper (NYSE: IP): Up 12% today after earnings and revenue beat expectations. The stock has become a major winner in 2024, returning 50% year-to-date while sporting a 3.4% dividend yield.
- Norwegian Cruise Line (NYSE: NCLH): Up 8% today after earnings. Cruise stocks have been rallying recently as oil prices have fallen, but Norwegian also reported strong guidance for the fourth-quarter which indicates cruise demand is strong.
As of 10 a.m. ET, the Nasdaq is down big. The Nasdaq Composite is off 1.85%, which is the steepest drop of major indexes.
- S&P 500: Down 64.74 (-1.11%)
- Dow Jones Industrial Average: Down 240.61 (-.57%)
- Russell 2000: Down 9.41 (-.43%)
The primary reason the Nasdaq is underperforming other indexes is earnings. Last night major Nasdaq companies like Microsoft (Nasdaq: MSFT) and META (Nasdaq: META) reported earnings and are both down more than the index today. Let’s look at today’s major news.
Microsoft Down 5%
Microsoft topped earnings expectations, but their guide for next quarter’s revenue came in at $68.1 to $69.1 billion. That is below consensus estimates of $69.9 billion. That weakness in sales next year was enough to spur a sell-off, and the company’s shares are down 5.2% in early trading.
So, were Microsoft’s results really that “bad?” The most watched figure when Microsoft reports is their cloud computing growth. That’s a division that increasingly relies on AI workloads for strong growth rates. Microsoft forecasted 31-32% revenue growth in Azure next quarter (in constant currency), which is a bit below expectations. However, the company noted its revenue is being held back as it waits for delivery of new NVIDIA (Nasdaq: NVDA) Blackwell chips.
Microsoft and AI are increasingly tied at the hip. In the latest quarter the company reported 33% growth in Azure, but that growth would have been only 21% if it wasn’t for AI. Of course, the company is having to spend big to achieve this growth. Its capital expenditures (mostly focused on new data centers) hit $20. billion last quarter, which is up from $11.2 billion in the same quarter a year ago.
META Platforms Also Down
Another large tech stock that’s down after earnings today is Meta Platforms. The company delivered sales and earnings that beat expectations. However, headcount at the company is once again growing (up 9.4% versus last year) and CEO Mark Zuckerberg gave hints he plans to continue spending aggressively on AI next year .
Meta was able to grow its EPS 37.4% last quarter while revenues grew 18.9%. Next quarter META forecast a 15.9% sales growth rate. Clearly, the company needs expenses to stay in check if its going to continue growing profits in excess of revenue growth. So investors are fretting that rising headcount and expenses on AI could cause profit growth to slow dramatically next year.
Then again, the last time investors sold off Meta because of major investments, the company bottomed at around $80 per share and has since returned almost 600% in two years.
AI Stocks Down Across the Board
Looking at the broader AI space, there is plenty of red today.
- Monolithic Power Systems (Nasdaq: MPWR): Down 18% today after issuing earnings. The stock’s earnings and revenue topped expectations, but guidance was in line. That may not sound like poor earnings, but the stock was up 100% in the past year headed into earnings and investors were clearly expecting more. Monolithic Power currently trades for about 85 times earnings.
- Super Micro Computer (Nasdaq: SMCI): Is down again today after its auditor resigned. The stock had been under prior scrutiny for aggressive accounting practices and now faces the risk of being delisted by the Nasdaq. its shares are down 17% today.
Among larger AI bellwethers, NVIDIA (Nasdaq: NVDA) is down 4% today. The reason for its decline is pretty simple: the market is selling off stocks that have maintained aggressive AI spending targets, which could produce more pressure on those stocks to reel in spending plans on NVIDIA’s chips in the years ahead.
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