Stock market today: Microsoft, Meta and the burden of expectations knock Wall Street sharply lower

A sign marking the intersection of Wall Street and Broadway in New York's Financial District is shown on Wednesday, Oct. 30, 2024. (AP Photo/Peter Morgan) · Associated Press · ASSOCIATED PRESS

NEW YORK (AP) — The downside of high expectations thumped Wall Street on Thursday, and Microsoft and Meta Platforms dragged U.S. stock indexes lower despite delivering strong profits for the summer.

The S&P 500 sank 1.9% for its worst day in eight weeks and fell further from its record set earlier this month. The Dow Jones Industrial Average dropped 378 points, or 0.9%, while the Nasdaq composite tumbled 2.8% for a second straight loss after setting its latest all-time high.

Microsoft reported bigger profit growth for the latest quarter than analysts expected. Its revenue also topped forecasts, but its stock nevertheless sank 6% as investors and analysts scoured for possible disappointments. Many centered on Microsoft’s estimate for upcoming growth in its Azure cloud-computing business, which fell short of some analysts’ expectations.

The parent company of Facebook, meanwhile, likewise served up a better-than-expected profit report. As with Microsoft, that wasn’t enough to boost its stock. Investors focused instead on Meta Platforms’ warning that it expects a “significant acceleration” in spending next year as it continues to pour money into developing artificial intelligence. It fell 4.1%.

Both Microsoft and Meta Platforms have soared in recent years amid a frenzy around AI, and they’re entrenched among Wall Street’s most influential stocks. But such stellar performances have critics saying their stock prices have simply climbed too fast, leaving them too expensive. It’s difficult to meet everyone’s expectations when they’re so high, and Microsoft and Meta were both among Thursday’s heaviest weights on the S&P 500.

Amazon and Apple also helped drag the market lower, with Amazon falling 3.4% and Apple dropping 2% before they released their profit reports after trading ended for the day. They’re the latest companies in the highly influential group of stocks known as the “Magnificent Seven” to do so.

Earlier this month, Tesla and Alphabet kicked off the Magnificent Seven’s reports with results that investors found impressive enough to reward with higher stock prices.

The lone remaining member, Nvidia, will report its results later this earnings season, and its 4.8% drop was Thursday’s heaviest weight on the market after Microsoft. Expectations are just as high for the chip company after its stock soared over 880% in the last two years.

The tumble for Big Tech on the last day of October wiped out the S&P 500’s gain for the month. The index fell 1% for its first down month in the last six, even though it set an all-time high during the middle of it.