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The S&P had its worst day since July. Most stocks went up.
Tech sank and pulled the S&P down 1.2% on Thursday. But the Dow held flat, small companies rose, and the ten-year yield fell below 5%.-->
The Close The S&P 500 fell 1.2% to 7,663. The Nasdaq lost 694 points, or 2.6%, to 26,009. The Dow barely moved, up 12 points. Small companies held up. The Russell 2000 rose 0.1%. Six of the eleven sectors finished higher, led by consumer staples, up 3.3%.
The Big Tech reports set the tone. Lam Research fell 11.8%, the worst day of the group, and dragged the other chip equipment makers with it. Meta lost 7.0% as investors looked at how much it plans to spend on AI. Tesla fell 3.1%. IBM is the lesson of the day. It was down about 6% early Thursday morning, then recovered and closed up 0.3%. Moves before the open are a first guess, not a verdict. Moderna fell 17.6% after details of its melanoma vaccine trial leaked online ahead of a medical conference this weekend. Allegion jumped 11.0% after it beat forecasts and raised its outlook, and Blackstone gained 8.4% after beating profit forecasts. What The Market Is Pricing In Look past the index and the picture flips. The S&P fell because its biggest companies are tech companies, and tech fell 3.3%. Most other U.S. stocks rose. The bond market tells you why. The ten-year yield dropped about 0.19 points to 4.95%, one of its biggest one-day drops in more than a year. That happened on a day oil jumped 4% to $113, which usually pushes yields up, not down. When investors get nervous, they sell what feels risky and buy what feels safe. Wall Street calls this a flight to safety. On Thursday, the risky stuff was AI stocks, and the safe stuff was government bonds, food makers and utilities. Falling yields also helped anything tied to borrowing. Lennar rose 8.7% and other home builders followed. The banks and real estate stocks gained about 1% each.
I've seen this before. On July 11, 2024, the Nasdaq fell about 2% while the Russell 2000 jumped about 3.6%. The headline looked bad, but most stocks rose. Money was leaving the biggest tech names and spreading out. That rotation lasted a few weeks before tech came back. Next week puts it to the test, because the biggest names report. What's Next Three things I'm watching next week: 01 The Fed The Fed announces its rate decision on Wednesday, October 28, at 2:00 p.m. Eastern, and Chair Kevin Warsh speaks at 2:30 p.m. Traders expect no change. With the ten-year back under 5%, watch whether he sounds more relaxed about inflation or more worried about oil. 02 Microsoft, Alphabet, Amazon Microsoft and Alphabet report Wednesday, October 28, after the close. Amazon follows on Thursday, October 29, after the close. After this week, the question is simple: is the AI spending turning into sales fast enough? 03 Inflation and Growth The government's first estimate of third-quarter growth and the PCE inflation report, the Fed's favorite price gauge, both come out Thursday, October 29, at 8:30 a.m. Eastern. With Brent above $110, the inflation number matters more than usual. The S&P fell. Most stocks rose. The money is moving away from AI, and next week we find out whether it comes back.
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