All three U.S. stock indexes closed lower on Thursday after Microsoft and Meta Platforms highlighted growing artificial intelligence costs that could hit their earnings, curbing enthusiasm for megacaps that have fueled the market rally this year.
Market Snapshot
The Dow Jones Industrial Average fell 378.08 points, or 0.90%, to 41,763.46. The S&P 500 lost 108.22 points, or 1.86%, at 5,705.45 and the Nasdaq Composite dropped 512.78 points, or 2.76%, to 18,095.15.
Market Movers
Fiscal first-quarter earnings at Microsoft of $3.30 a share beat analysts' estimates of $3.10, and revenue of $65.6 billion topped forecasts of $64.6 billion, but the technology giant fell 6.1% after issuing second-quarter revenue guidance that was lower than expected. Microsoft also forecast rising expenses related to artificial intelligence.
Meta Platforms, Inc. was down 4.1% after the parent company of Facebook and Instagram posted better-than-expected third-quarter earnings but forecast rising infrastructure expenses next year. Meta Platforms said it continues to expect "significant capital expenditures growth in 2025," adding it will have a "significant acceleration in infrastructure expense growth next year."
SUPER MICRO COMPUTER INC stock fell 12%. A day prior, the server maker tumbled 33% after disclosing its accounting firm Ernst & Young had resigned. The firm, in a securities filing from Super Micro, said information recently came to its attention "which has led us to no longer be able to rely on management's and the Audit Committee's representations." Super Micro said it disagreed with Ernst & Young's decision to resign.
Uber tumbled 9.3% after the ride-sharing company reported third-quarter earnings and revenue that beat Wall Street estimates but gross bookings rose 16% to $40.97 billion, slightly below expectations.
Booking Holdings, the online-travel company, posted third-quarter adjusted earnings and revenue that beat analysts' estimates as gross travel bookings rose 9% from a year earlier and room nights booked rose 8%. The stock was up 4.8%.
Comcast rose 3.4% as third-quarter earnings topped Wall Street expectations with the 2024 Paris Olympic Games giving the cable and entertainment company's media division a big boost. The company also said it was considering spinning off its cable networks into a separate business.
Carvana Co. jumped 19% after third-quarter earnings topped analysts' estimates. The used-car seller reported third-quarter earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $429 million on revenue of $3.7 billion. Wall Street was expecting Ebitda of $330 million and revenue of $3.5 billion.
Roblox Corporation rose 20%. The online gaming company reported third-quarter bookings of $1.13 billion, better than analysts' expectations of $1.03 billion. The company also reported a narrower-than-expected loss of 37 cents a share.
U.S.-listed shares of Chinese electric-vehicle maker Li Auto fell 14% after the company reported a decline in third-quarter profit even as revenue jumped 24%.
Estee Lauder tumbled 21% after the cosmetics company withdrew guidance for the year. The company cited "particular difficulty in forecasting the timing of market stabilization and recovery in China and Asia travel retail" and the naming of a new chief executive.
Peloton Interactive, Inc. rose 28% after the at-home fitness company appointed a new chief executive and reported better-than-expected fiscal first-quarter results.
Root, Inc. , the parent company of Root Insurance, surged 69% after swinging to a profit in the third quarter and reporting a jump in revenue of 165% to $305.7 million. Wall Street expected revenue of $272.8 million. The company also refinanced its term loan with BlackRock. With the refinancing, Root said it expects to lower interest expense "on a run rate basis by roughly 50%, which will serve to further accelerate our profitability trajectory."
Shares of eBay fell 8.2% after the online commerce site issued weak guidance for the fourth quarter and year. The company estimated full-year revenue of $10.23 billion to $10.29 billion, lower than analysts' predictions of $10.32 billion.
Market News
Apple Disappoints Investors With Tepid Forecast, China Weakness
Apple, heading into its most critical sales period of the year, sparked fresh concerns about revenue growth and lingering weakness in an intensely competitive China market.
Following the company’s quarterly earnings report, Apple said that total sales in the December period will rise by a percentage in the low-to-middle single digits. Analysts had been projecting a 7% increase. The company also posted a decline in China revenue last quarter, falling short of estimates.
Amazon Belt-Tightening Produces Strong Cloud, E-Commerce Results
Amazon.com reported strong results that showed a company humming on all cylinders, a testament to its efforts to cut and reallocate costs and put the cloud computing and e-commerce giant on sounder footing.
The Amazon Web Services cloud division, which suffered record low sales growth last year, continued to regain momentum during the third quarter. The online retail operation, which sputtered coming out of the pandemic, grew unit sales by double digits. So did revenue at Amazon’s fast-growing advertising business.
Intel Surges After Results Spark Optimism Over Turnaround
Intel gave a fourth-quarter revenue forecast slightly above estimates, sparking optimism that it’s capable of reclaiming some lost market share.
Fourth-quarter revenue will be $13.3 billion to $14.3 billion, the Santa Clara, California-based company said in a statement. That compares with the $13.6 billion analysts estimated on average. The company is projecting a profit of 12 cents a share compared with the 6 cents Wall Street projected.
OpenAI Brings Search to ChatGPT, Heating up Rivalry with Google
Microsoft-backed OpenAI is adding a new set of search features to ChatGPT, heating up the tech competition with Alphabet's Google.
The AI startup said users can get fast, timely answers with links to relevant web sources. ChatGPT will choose to search the web based on what the users ask or they can manually choose to search by clicking the web search icon.
