💻 3 Key Reasons Tech Stocks Took a Big Hit

On October 23, 2024, Wall Street experienced a significant downturn, with the S&P 500 and Nasdaq Composite suffering their worst day in over a month.

Here’s a closer look at what happened and why.

1. Major Tech Earnings Disappoint

The biggest factor in the market decline was disappointing earnings reports from several major technology companies.

The S&P 500 dropped 1.86%, closing at 5,705.45, while the Nasdaq fell 2.76% to 18,095.15. This was the largest single-day drop for both indexes since early September.

For instance, Microsoft’s shares fell by 6% after the company released a revenue forecast that did not meet investor expectations, even though it beat earnings estimates for the quarter. Similarly, Meta Platforms, the parent company of Facebook, saw its stock drop over 4% after it missed user growth targets and warned of rising expenses in 2025.

Investment strategist Ross Mayfield commented, “We’re getting to the point where AI enthusiasm and potential is not enough.” This means that while investors are excited about the potential of technology companies, they are also looking for solid growth results—and some of the recent reports haven’t delivered.

2. Mixed Results from Other Tech Giants

Tech earnings this week have been a mixed bag. Alphabet, Google's parent company, saw its shares rise nearly 3% after posting strong revenue growth. However, chipmaker AMD had a rough day, with its stock plummeting more than 10% due to disappointing future guidance.

On the same day, more earnings reports were anticipated from big names like Apple and Amazon, which added to the uncertainty in the market. The tech sector, which has been a leader in the stock market for years, is now facing challenges as investors reassess its growth potential.

3. Economic Indicators and Market Sentiment

The decline in tech stocks came amid mixed economic signals.

The latest report on personal consumption expenditures (PCE) showed that inflation rose by 2.1% over the past year, aligning with the Federal Reserve's target of 2%.

This economic data is crucial as it will inform the Fed's interest rate decision scheduled for November 7.

Investors are closely watching economic indicators and their potential impact on interest rates. If the Fed decides to raise rates, it could lead to higher borrowing costs and impact corporate profits. The uncertainty surrounding the upcoming U.S. Presidential election on November 5 has also contributed to market volatility.

Conclusion

In summary, the sharp decline in the S&P 500 and Nasdaq was primarily driven by disappointing earnings from major tech companies, mixed results from other tech giants, and the looming uncertainties in economic indicators.

As the market continues to digest these reports and prepare for important upcoming events, investors will be keenly focused on how these developments will shape the future of tech stocks.

With the current fluctuations, some investors may see potential buying opportunities, especially if they believe in the long-term growth of these tech companies.

As the stock market faces fluctuations and uncertainties, staying informed is crucial for making smart financial decisions.

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