The New York stock market ended the last day of October with a steep downturn.
The tech-heavy Nasdaq index plunged by 2.8%, leading to a notable market decline on October 31.
Profit-taking following the recent surge in tech stocks, rising Treasury yields, concerns about short-term performance slowdowns due to Big Tech’s ongoing expansion of artificial intelligence (AI) investments, and anxiety surrounding the presidential election triggered a massive sell-off.
Tech Stocks Plummet
The Nasdaq closed at 18,095.15, down 512.78 points (2.76%) from the previous day, barely maintaining the 18,000 mark.
While the Dow Jones Industrial Average and the Standard & Poor’s (S&P) 500 didn’t experience as steep a decline as the Nasdaq, both indexes fell below their respective 42,000 and 5,800 levels.
The Dow closed at 41,763.46, down 378.08 points (0.90%), while the S&P 500 ended at 5,705.45, falling 108.22 points (1.86%).
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s fear gauge, surged by 14%, jumping 2.81 points (13.81%) to reach 23.16.
All three major indices posted declines overall for October. The Dow fell 1.3%, the S&P 500 dropped 1%, and the Nasdaq slipped 0.5%.
Treasury Yields Rise
The 10-year US Treasury bond yield, which sets the benchmark for market interest rates, rose to 4.286%, up 0.022 percentage points from the previous day.
As Treasury yields rise and influence interest rates, they negatively impact Big Tech stocks by reducing the present value of future earnings that drive these companies’ stock prices.
Although the Department of Commerce reported that the September Personal Consumption Expenditures (PCE) price index, which the Federal Reserve uses as an inflation gauge, remained close to the Fed’s 2% target at 2.1%, the market largely disregarded this information. Instead, Treasury yields surged amid speculation that if former President Donald Trump wins the upcoming election, the US fiscal deficit will surge, leading to heightened Treasury issuance.
Increased Treasury issuance inevitably caused prices to drop, leading to higher yields, which move inversely to prices.
M7 Stocks Tumble Across the Board
All M7 Big Tech stocks experienced sharp declines.
Notably, Microsoft and Meta Platforms reported better-than-expected quarterly earnings after the previous day’s market close and saw significant drops.
Concerns about short-term profitability decline due to ongoing AI investment expansion contributed to the sharp stock price declines.
MS plummeted $26.18 (6.05%) to $406.35, while Meta dropped $24.22 (4.09%) to $567.58.
AI chip leader Nvidia faced turmoil following allegations of accounting fraud against AI server company Super Micro Computer (SMCI).
Worries that SMCI’s troubles could impact demand for Nvidia’s AI chips compounded the profit-taking sell-offs.
Nvidia slid $5.68 (4.72%) to $132.76. SMCI, which had plunged 33% the previous day, fell another $3.96 (11.97%) to $29.11.
Apple closed at $225.91, down $4.19 (1.82%). After the market close, Apple reported better-than-expected iPhone sales but continued to decline in after-hours trading, falling 1.2% to $223.20.
Tesla fell for four consecutive days, closing at $7.70 (2.99%) at $249.85. Alphabet dropped $3.35 (1.92%) to $171.11, while Amazon plunged $6.33 (3.28%) to $186.40.
Oil Prices Surge on Fears of Iranian Retaliation Against Israel
International oil prices continued to rise for the second consecutive day.
While gains during regular trading were less than 1%, prices surged about 3% in after-hours trading.
Reports that Iran is preparing for retaliatory attacks against Israel drove the sharp increase in oil prices.
The international oil benchmark Brent crude closed regular trading at $73.16 per barrel, up $0.61 (0.84%), while US oil benchmark West Texas Intermediate (WTI) ended at $69.26 per barrel, up $0.65 (0.95%).
However, prices spiked in after-hours trading following news that Israel had obtained intelligence suggesting Iran might launch retaliatory attacks within days, possibly before the US election on November 5.
In after-hours trading, Brent crude for January delivery surged $2.10 (2.91%) to $74.26 per barrel. WTI jumped $2.15 (3.13%) to $70.76 per barrel.
