Stock Market Today: Nasdaq Leads Decline as Treasury Yields Rise Amid Big Tech Earnings

The Nasdaq Composite led a significant decline in US stocks on Thursday as rising Treasury yields and mixed earnings reports from Meta and Microsoft raised concerns about the profitability of Big Tech. While both companies exceeded Wall Street’s expectations, they also indicated a planned increase in spending on artificial intelligence (AI) infrastructure, which created worry among investors about potential impacts on margins.

Tech-Heavy Nasdaq Composite Takes a Hit

In Thursday's trading session, the Nasdaq Composite (^IXIC) dropped approximately 1.8%, reflecting investor caution in the tech sector. The S&P 500 (^GSPC) fell around 1%, while the Dow Jones Industrial Average (^DJI) also declined by roughly 0.6%. This broad market reaction came as optimism around tech stocks was tempered by the earnings reports from Meta and Microsoft, which, despite solid numbers, hinted at increasing costs related to expanding AI capabilities.

Meta and Microsoft are both key players in the "Magnificent Seven," a group of technology giants that include Amazon and Apple, which were set to report earnings later in the day. Shares of both Amazon and Apple showed early declines in response to the cautious market sentiment surrounding their peers.

Impact of Rising Treasury Yields on Market Sentiment

Alongside the concerns surrounding Big Tech’s profitability, rising bond yields contributed to market unease. The 10-year US Treasury yield climbed to 4.33%, signaling investor shifts toward safer assets amidst economic uncertainties. Concurrently, the US Dollar Index (DX-Y.NYB), which compares the dollar against a basket of foreign currencies, also strengthened, reflecting a general increase in risk aversion.

Outside the US, bond markets in the UK experienced intensified selling as concerns grew around inflation driven by fiscal stimulus and borrowing. These international dynamics are adding to the pressures already felt in the American stock market as investors weigh the effects of rising interest rates on economic growth and corporate profits.

Inflation Data and Employment Figures Heighten Market Anxiety

Adding to the complex economic picture, investors closely examined the latest Personal Consumption Expenditures (PCE) index report, the Federal Reserve’s preferred inflation gauge. The "core" PCE, which excludes volatile food and energy prices, rose by 2.7% annually in September, slightly above economists' expectations of 2.6%, and consistent with the 2.7% increase reported in August. This inflation data arrives just before the Federal Reserve’s policy decision, further fueling speculation on future interest rate paths.

Moreover, initial jobless claims showed a decline, dropping by 12,000 to 216,000 – a five-month low that contrasted with estimates of 230,000. This unexpected decrease in claims came after private payrolls saw a notable increase in October, creating a nuanced backdrop for the upcoming monthly jobs report. Investors are likely to scrutinize this report as they look for additional indicators of economic health amidst rising interest rates and slowing growth in some sectors.

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