On Thursday, U.S. stocks closed sharply lower, with the S&P 500 and Nasdaq recording their biggest single-day declines since September 4. Microsoft and Meta dragged the Nasdaq down by over 500 points, as both companies exceeded expectations in revenue and profit, but their returns on AI investments were questioned.
Most large-cap tech stocks declined. Microsoft saw its largest drop in two years after forecasting a slowdown in quarterly cloud revenue growth, reflecting difficulties in expanding data centers fast enough to meet AI demand. Meta fell 4% after warning of a significant increase in capital spending next year.
Veteran investor Jeremy Grantham, who has successfully predicted three market bubbles, warned that the unrestrained hype around AI has become a classic bubble, potentially leading U.S. stocks onto a challenging path as the bubble grows larger.
In economic data, the latest report released Thursday supported expectations that the Fed will continue a cautious approach to rate cuts. U.S. September PCE inflation met expectations, with an annual increase of 2.1%, edging closer to the Fed’s 2% target and down from an upwardly revised 2.3% in August. However, core PCE prices rose by 2.7%, marking the highest monthly gain in six months. Meanwhile, initial jobless claims fell to a five-month low, suggesting a strong labor market.
In earnings news, Apple’s post-market report showed a nearly 2% drop in stock due to stalled sales growth in Greater China. Amazon surged nearly 6% in after-hours trading as both revenue and EPS surpassed expectations. Intel also rose, briefly up over 12% after hours, boosted by a strong Q3 report and slightly optimistic Q4 guidance.
US Stocks
Fundamental Analysis:
Most major tech stocks fell, with Microsoft dropping over 6%, Meta over 4%, and Apple and Google both down nearly 2%. Chip stocks broadly declined, with Arm down over 8%, Nvidia and Micron over 4%, Broadcom nearly 4%, Qualcomm nearly 3%, and TSMC over 2%. Gold stocks also dropped, with Coeur Mining down nearly 6%, Hecla Mining down over 4%, and Harmony Gold, Gold Fields, and Pan American Silver all down close to 4%.
Most Chinese ADRs fell as well, with the Nasdaq Golden Dragon China Index down over 1%. Li Auto dropped over 13%, NIO over 4%, Tencent Music over 2%, while Baidu and XPeng declined over 1%.
Technical Analysis:
Market Trends:
- Dow: Down 378.08 points (-0.90%) at 41,763.46
- Nasdaq: Up 512.78 points (-2.76%) at 18,095.15
- S&P 500: : Down 108.22 points (-1.86%) at 5,705.45
Hong Kong Stock Market
Fundamental Analysis:
Hong Kong’s three major indexes rose, with tech stocks broadly gaining. Tencent rose over 4%, Meituan nearly 4%, and JD.com nearly 3%. Rare earth stocks led the rally, with JL Mag Rare-Earth surging over 38%. Real estate stocks also strengthened, with China Resources Land up over 5%. However, auto stocks partially declined, with Li Auto dropping over 7% post-earnings, while shipping stocks were active, with COSCO Shipping Holdings up over 8%. Semiconductor and solar stocks were mostly down.
Apple-concept stocks led losses, with Q Technology down nearly 4% as Apple’s Q4 profit dropped 35.8% year-on-year, primarily due to a $10.2 billion tax expense linked to its 2016 tax treatment in Ireland.
Technical Analysis:
- Hang Seng Index: Up 1.57% to 20,635.73
- Hang Seng Tech Index: Up 0.79% to 4,534.59
- China Enterprises Index: Up 1.82% to 7,396.23
FTSE China A50 Index
Fundamental Analysis:
A-shares traded mixed in early Thursday trade, with all three major indexes fluctuating by midday. Total market turnover reached 1.6144 trillion yuan, up 207.6 billion yuan from the previous day, with over 3,700 stocks declining.
Sector-wise, rare earth magnets, metal new materials, and pharmaceutical commercial stocks led the gains, while AI and data security stocks dipped. The rare earth sector led the gains, with over ten stocks hitting their daily limit following news of a supply halt in Myanmar. Base metal stocks were also active, with Huaxi, Huayu Mining, China Nonferrous Metals, and Xiamen Tungsten among those hitting the limit. Several high-volume stocks saw sudden pullbacks, including Hytera, Changshan Beiming, Runhe Software, Sichuan Changhong, TCL Technology, and OFILM, each trading over 10 billion yuan.
Technical Analysis:
Market Trends:
- Shanghai Composite Index: Up 0.60% to 3,299.61
- Shenzhen Component Index: Up 0.15% to 10,607.41
- ChiNext Index: Down 0.08% to 2,162.76
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