Source : the age
A historic drop for Alphabet’s stock dragged the US market lower after the company behind Google and YouTube reported weaker growth for the summer than analysts expected. The report underscored worries about whether all its huge investments in artificial-intelligence technology will pay off.
The S&P 500 fell 0.3 per cent for its first loss in four days, even though the wide majority of stocks rose within the index and across Wall Street. The Nasdaq composite tumbled 1.4 per cent, while the Dow Jones Industrial Average dropped 132 points, or 0.3 per cent.
The Australian sharemarket is set to rise, with futures at 6.59am AEDT pointing to a gain of 32 points or 0.4 per cent at the open. The ASX added 0.5 per cent on Thursday. The Australian dollar was 0.3 per cent lower at US70.34¢.
Alphabet is one of the most influential stocks on Wall Street because it’s one of the largest, and the Class A shares of its stock fell 12.6 per cent for their worst day since they began trading more than 20 years ago. The tech giant had been under pressure to at least meet analysts’ expectations for growth amid concerns about how much it’s spending to invest in AI.
Alphabet said that it burned through more cash during the latest quarter, according to a measure called free cash flow, after its purchases of property and equipment topped $51 billion.
Worries are weighing on the entire AI industry following a frenzy to build data centres and fill them with AI chips. Not only are concerns high that the AI revolution may not produce as much profit and productivity as hoped, future spending on data centres is also under pressure because of how expensive it’s become to borrow money to buy more chips.
Amazon offered a cautious sales outlook for the current fourth quarter that encompasses the critical holiday shopping period after delivering fiscal third-quarter results after the closing bell that came in below Wall Street analysts’ expectations.
The Seattle-based tech giant, however, posted strong sales growth in its prominent cloud computing unit. Sales in its so-called Amazon Web Services rose 39.3 per cent during the latest quarter ended September 30, higher than the 37 per cent clip in the previous quarter. It marked the fastest growth rate in nearly five years, the company said.
Still, shares were down more than 5 per cent in after-market trading when the results were released as investors focused on the core business.
Alphabet’s drop overshadowed what would have otherwise been a good day for the US stock market. Four out of every five stocks within the S&P 500 climbed, and the index would have been higher if not for Alphabet.
Many companies rallied after reporting stronger profits for the summer than analysts expected, including KLA Corp. The company, whose equipment helps make semiconductors, rose 5.5 per cent.
Eli Lilly climbed 6.6 per cent , Mastercard rose 4.2 per cent and Merck added 3.8 per cent.
DoorDash rose 5.6 per cent after saying it agreed to buy Instacart in a deal valuing it at $US17 billion. DoorDash also reported stronger profit and revenue for the latest quarter than analysts expected.
Norwegian Cruise Line Holdings steamed 13.4 per cent higher after likewise topping expectations for summertime profit and revenue. It benefited from cruisers spending more money once aboard ships than the company expected, among other things.
Expectations are high for profit growth broadly across US companies. That’s what allowed the S&P 500 to set its record earlier this month despite high interest rates and other worries weighing on the stock market.
All told, the S&P 500 fell 23.59 points to 7,720.39 Thursday. The Dow Jones Industrial Average dropped 132.54 to 52,342.56, and the Nasdaq composite tumbled 365.13 to 26,184.72.
In the bond market, Treasury yields eased following several mixed reports on the US economy.
The overall economy’s growth may have accelerated more during the summer than economists expected, thanks to spending by US consumers and businesses investing in AI, according to a preliminary report. But Americans’ growth in incomes was weaker in September than economists expected, while a measure of inflation worsened.
Fewer US workers applied for unemployment benefits last week, meanwhile, which could indicate few layoffs across the country.
Following the jumble of reports, the yield on the 10-year Treasury fell to 4.94 per cent from 5.05 per cent late Wednesday. It’s been generally pulling back since it topped 5.30 per cent earlier this month and touched its highest level since 2002.
Helping to drag yields lower on Thursday was a drop in oil prices. The price for a barrel of Brent crude oil fell 0.8 per cent to $US110.80.
In stock markets abroad, indexes rose in Europe after the European Central Bank held interest rates steady on the continent. The bank’s president, Christine Lagarde, also said she will resign in February, nine months before the end of her term.
In Asia, indexes were mixed. South Korea’s Kospi fell 1.2 per cent due to a drop for market heavyweight Samsung Electronics, which sank 4.1 per cent even though it reported a jump in profit.
AP
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