Mid-Day Report: Indices Crash and Burn Ahead of Apple and Amazon Earnings...

Ahhh sh*t… here we go again. For those who haven’t checked their portfolios today (thank God you haven’t), the S&P 500 has taken another dive, dropping 1.46%, while the Nasdaq lost 2.5%—both on track for their second day of declines. 

(Source: Giphy) 

The Dow, not wanting to feel left out of being taken behind the barn and shot, slid 350 points, or 0.8%. Why, you ask? Because Microsoft and Meta decided to deliver earnings reports that apparently woke up Wall Street to the tune of “AI is a friggin 'money pit”. 

(Source: CNBC) 

First off, I already wrote about Microsoft this morning, but ICYMI - Bill Gates’ baby DID beat earnings expectations and still managed to disappoint everyone with their revenue guidance. Shares tanked 6% because apparently, investors were expecting Microsoft’s cloud business to grow like a weed. Instead, Microsoft told them, “I’m a shower, not necessarily a grower right now”. 

Plus add in the fact that their partnership with Open AI has become a vacuum of burning cash - with Microsofts CFO hinting that the investment may end up cutting into profits, it’s easy to see why the carnage is being felt in share value. 

(Source: New York Times) 

On the other hand, we have frat boy Zuck’s Meta Platforms, who also beat on top- and bottom-lines but danced to the same song as Microsoft. Shares dropped more than 3% after the company warned that capital expenditures are going to skyrocket in 2025. Pop Quiz: Can you guess what’s eating up all that cash? Yep, AI. 

Apparently, building the metaverse isn’t enough of a money pit—Meta needs to blow even more on AI infrastructure.And as if that wasn’t enough, Meta also missed user growth expectations (a.k.a. The metric that actually keeps the lights on). 

(Source: Giphy) 

This has investors squirming with fear that the AI hype may be starting to wear off some. Especially since they’ve been riding this bronco all friggin 'year - Whereas now, we’re all realizing that just because a company says “AI” a hundred times in an earnings call doesn’t mean their stock is magically going to the moon. As Ross Mayfield from Baird Private Wealth Management put it, “AI enthusiasm and potential is not enough.” Translation: Show us the money, or GTFO.

(Source: The Economist) 

Meanwhile, Alphabet has somehow managed to avoid this clusterf**k of earning disasters. Its stock rose nearly 3% after reporting strong revenue growth. CEO Sundar Pichai even threw in a line about how their AI investments are “paying off,” which, for once, didn’t result in collective eye-rolling from investors. 

But, but, but… the fiasco could accelerate like a gasoline led dumpster fire after today’s closing bell. Why? Well because Apple and Amazon are reporting. Sure, Apple has “Apple Intelligence” but their latest new iPhone rollout (presumably the same phone as its other 10 predecessors) hasn’t exactly lit the world on fire. As for Amazon, well, it’s Amazon and they’re crushing it with their AWS cloud services. However, if they both crap a brick in their financials, expect more red across the board tomorrow. 

(Source: Guru Focus) 

On the economic front, we got the Personal Consumption Expenditures (PCE) report—the Fed’s favorite inflation gauge. Inflation’s up 2.1% year-over-year in September, which means we’re inching closer to the Fed’s 2% target. Great, right? Ehhh not quite. 

Core inflation (which excludes food and energy) came in at a hotter-than-expected 2.7%. So, the Fed’s still got work to do, and you can bet interest rates aren’t going anywhere anytime soon. 

(Source: Giphy)

The takeaway this fine Halloween Thursday? Well, it’s clear that Microsoft and Meta have dragged the market down as AI may not be the magic bullet it used to be. The good news is inflation is still somewhat cooling, just not fast enough. Which is why now it’s up to Apple and Amazon to either save the week or push the market further into the abyss. Yaaaay.

In the meantime, you may want to call it a day and take the rest of the day off (unless you enjoy the pain of watching your share value burn, that is). As for me, and our Stocks.News family - We aren’t sweating the meltdown. Why? Well because we just experienced a monster 64% winner yesterday in less than five hours. Click here for the details. 

As always stay safe and stay frosty, friends! Until next time…

Stocks.News holds position in Microsoft, Apple, Meta, Amazon, and Alphabet (Google) as mentioned in the article.