The Dow and S&P 500 closed October in the red, marking their first monthly losses since April as Halloween dealt investors more tricks than treats. A tech-driven selloff on Thursday dragged down the S&P 500, while the Nasdaq Composite recorded its largest single-day decline since early September.
Analysts attributed the dip to various unsettling factors, including Big Tech earnings and possible pre-election jitters. Thomas Martin, senior portfolio manager at Globalt Investments, commented that market participants seem overly focused on earnings from the “Magnificent Seven” tech giants, despite his view that the sector’s performance was generally “fine.”
The Nasdaq Composite fell 2.8% in its worst one-day percentage drop since Sept. 3, with tech sectors dragging down the S&P 500 by 1.9%. Meanwhile, the Dow Jones Industrial Average, which leans toward cyclicals, slipped 0.9%. This marked the first monthly declines since April for both the S&P 500 and Dow, and the first since July for the Nasdaq.
The Invesco QQQ Trust, tracking the Nasdaq-100, declined by 2.5%. Shares of Microsoft and Meta Platforms dropped 6.1% and 4.4%, respectively, after both companies reported strong earnings but cautious revenue outlooks, further pressured by substantial spending on AI development.
According to Louis Navellier, founder of Navellier & Associates, companies with high price-to-earnings ratios, especially in tech, face an uphill battle to meet expectations in this climate, which he calls “priced for perfection.” He also pointed to rising market uncertainty around the upcoming election, with volatility reflected in the Cboe Volatility Index rising above its long-term average.
Despite Thursday’s decline, Microsoft remains up over 8% year-to-date, with Meta gaining more than 60%, and Nvidia up nearly 170%. Still, some investors pointed to rising Treasury yields, with the 10-year rate now around 4.3%, up from 3.6% in mid-September. Higher yields challenge tech stock valuations by lowering the present value of projected future earnings.
From a technical standpoint, Jonathan Krinsky, chief market technician at BTIG, noted the S&P 500 has broken its uptrend since August. Krinsky had warned mid-October of potential weakness, and in his latest note projected that the next key level could be in the 5,500-5,650 range.
