S&P 500 Falls 1% as Meta Gets Hit on Spending Push: Markets Wrap

(Bloomberg) — Wall Street pumped the brakes on a stock rally as concerns over whether massive artificial-intelligence spending will pay off sent Meta Platforms Inc. down 11%. Bond yields and the dollar rose as the Federal Reserve tempered rate-cut expectations.

A selloff in several megacaps dragged down the S&P 500, following a $17 trillion surge from its April lows. While the US and China agreed on a trade truce, the deal was seen as mostly priced in. Meantime, equities triggered a “Hindenburg Omen” – a technical indicator that occurs when a bifurcated market loses momentum amid lackluster breadth.

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Those developments gave some reasons for stocks to take a breather amid warnings about valuations and a narrowing of participation that had spurred a significant outperformance of megacaps.

The AI trade is so essential to the bull market that any updates on spending and progress developing the technology could quickly sway traders one way or the other.

“None of this means that the AI bubble is going to burst and that we’re on the cusp of a major reversal in the stock market,” said Matt Maley at Miller Tabak. “However, it does raise the odds that we could see a short-term pullback.”

Meta sold $30 billion of bonds amid record orders. Microsoft Corp. slid on underwhelming results. Alphabet Inc. climbed on a revenue beat. Nvidia Corp. dropped as Donald Trump said he didn’t discuss approving sales of Blackwell chips to China with Xi Jinping.

In late hours, Apple Inc. reported strong overall sales, though revenue in China fell short of estimates. Amazon.com Inc.’s cloud unit posted a solid growth rate. Netflix Inc. approved a 10-for-1 stock split.

The S&P 500 fell 1%. The yield on 10-year Treasuries rose one basis point to 4.09%. The dollar hit a three-month high. Bitcoin sank.

The largest technology companies are betting on an AI future powered by gigantic data centers filled with humming servers. Now that the staggering cost of this push is coming into sharper focus, it’s testing nerves on Wall Street.

Three bellwethers from different corners of the technology world – Alphabet, Meta and Microsoft — together racked up some $78 billion in capital expenditures last quarter. That’s up 89% from a year earlier.

“The only takeaway that investors care about from big tech earnings is evidence of which company can stay in the AI race the longest,” said David Trainer at New Constructs. “None of these companies can keep up this huge spending on AI forever, and so those that find a way to profit first and the most from AI will be the winners.”

While more than “enough good news” is priced into stocks thanks to AI excitement, Trainer expects a pullback on the horizon.

“We maintain our conviction that AI-related stocks should drive further equity performance and believe that under-allocated investors should add exposure to the theme through a diversified approach,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.

On the trade front, Trump and Xi agreed to extend a tariff truce, roll back export controls and reduce other trade barriers in a landmark summit on Thursday, potentially stabilizing relations between the world’s biggest economies after months of turmoil.

The outcome is poised to resolve — at least for now — months of trade brinkmanship in which the US and China threatened a series of levies and export controls on their products that had the potential to disrupt global supply chains and hurt the world economy. Still, it falls short of a comprehensive agreement that addresses issues at the heart of the US-China economic competition.

“The much anticipated US-China trade agreement showed both sides willing to step away from recent escalations, but not willing to stand down from a longer-term competition,” said Paul Christopher at Wells Fargo Investment Institute.

He views the deal as lowering tariffs just enough to help China stay competitive with other Asian countries in manufacturing trade. While the US gets a reprieve on China’s block against rare-earth metals and US soybean imports.

“Probably the most important part of the deal is that the US backs away from additional technology restrictions on Chinese tech companies,” Christopher said. “The deal puts pressure on US tech companies to stay ahead of Chinese competitors and on US policy makers to continue the search for alternative rare-earth metals suppliers.”

Markets had largely anticipated the US-China deal, according to Fawad Razaqzada at Forex.com.

“Still, the easing of one of the major geopolitical uncertainties should be a welcome sign for risk assets,” he said.

Sentiment has cooled slightly since equities hit record highs on the back of AI enthusiasm, he noted, but the downside limited for the time being.

Meantime, traders continued to digest Fed Chair Jerome Powell’s blunt warning that investors need to rein in expectations for a December rate cut – underscoring a growing tug-of-war among US policymakers who are opposed in their outlooks for jobs and inflation.

His comments came after officials voted 10-2 to lower the target range for the federal funds rate by a quarter percentage point on Wednesday. It was the second straight rate cut, but for the first time in six years, there were dissents in both directions — with one official advocating a larger reduction and another preferring to stay on hold.

“Why it was hawkish? Because the moderates are pushing back,” said Andrew Brenner at NatAlliance Securities. “So if the Fed does not go in December, the bar of employment gets raised and expect fewer cuts next year.”

“Investors are left to read the tea leaves and listen to upcoming comments from Fed officials to determine whether rates will be reduced at the Fed’s next meeting in December,” said Chris Fasciano at Commonwealth Financial Network.

In the short term, this lack of clarity could trigger a pause or mild pullback in the market, particularly following several months of exceptional gains during what’s typically a volatile period, according to Todd Morgan at Bel Air Investment Advisors.

“But I don’t expect any decline to be substantial,” Morgan said. “Once investors digest the Fed’s messaging and the uncertainty clears, I anticipate markets will trend higher into year-end and the early part of next year.”

In the meantime, Commonwealth’s Fasciano believes corporate earnings remain a positive story for investors, and should be supportive for markets.

Bulls have history on their side, as November kicks off the best six months of the year for US equities. But the question is whether those year-end gains have already been priced into the market following one of the S&P 500’s best six-month stretches since the 1950s.

“With uncertainty around Fed policy going forward and the ongoing government shutdown, there is the potential for volatility,” he said. “But companies across a large swath of the economy continue to report solid earnings.”

Corporate Highlights:

Nvidia Corp. plans to invest as much as $1 billion in the artificial intelligence company Poolside, according to people familiar with the matter — part of a deal that would quadruple the valuation of the AI startup. Palantir Technologies Inc. sued two former senior artificial intelligence engineers, claiming they stole documents and information to help launch a “copycat” competitor, Percepta. Mastercard Inc. reported third-quarter earnings that beat analysts’ estimates as consumer and corporate spending remained robust. Coinbase Global Inc., the largest US crypto exchange, reported revenue that exceeded Wall Street’s third-quarter estimates. Reddit Inc. projected fourth-quarter sales that beat analysts’ expectations, a sign that its advertising business will continue to grow at a steady clip a year-and-a-half after going public. Gilead Sciences Inc. reported third-quarter product sales that missed expectations as the steady growth of key HIV drugs wasn’t enough to offset declines in its Covid and cell therapy treatments. Eli Lilly & Co. raised its full-year guidance as revenue from its blockbuster weight loss and diabetes drugs beat expectations in the third quarter and it began solidifying its lead over its biggest rival. Merck & Co. shaved the top end of its 2025 revenue guidance and failed to produce any standout sales beats for its medicines in the third quarter, adding to challenges the drugmaker is facing as it prepares for the loss of its star cancer drug Keytruda. Bristol Myers Squibb Co. raised its revenue outlook for the year after newer medicines outperformed expectations, easing pressure on its portfolio of aging blockbusters. Biogen Inc. cut its full-year profit guidance on higher costs from deals the company has been doing to offset the decline of its aging multiple sclerosis drugs. Turnaround efforts at Estée Lauder Cos. are gaining momentum despite rising costs and concerns about consumer spending. Core Scientific Inc. shareholders rejected a takeover bid by CoreWeave Inc. that proxy advisers said undervalued the data center company, ending a contentious monthslong saga. Comcast Corp. reported its 10th straight quarter of losses in broadband customers and said it doesn’t expect the trend to turn around in the near future. Kimberly-Clark Corp.’s third-quarter earnings beat Wall Street estimates, a sign shoppers may be starting to move past the economic uncertainty that hurt results earlier this year even as overall sentiment remains weak. Crocs Inc. warned that US consumers were increasingly cautious despite reporting better than expected earnings. Hershey Co. called out disappointing Halloween sales so far in the US, but still upped its annual outlook thanks to price hikes. Roblox Corp. reported widening losses in the third-quarter as costs at the video-game company increased during a period of soaring user engagement. Cigna Group’s pledge to upend the way medicine is priced spooked Wall Street after the company warned the move would hurt profits in the next two years. Altria Group Inc.’s pivot away from cigarettes stumbled in the third quarter as demand slowed for its smokeless products. American International Group Inc. agreed to buy stakes in specialty insurer Convex Group and alternative asset manager Onex Corp. in transactions that total more than $2.7 billion. Cleveland-Cliffs Inc. named South Korean steelmaker Posco Holdings Inc. as its new strategic partner, identifying the firm behind a deal touted 10 days ago by the American steel producer. Elon Musk’s SpaceX has proposed a faster way to take astronauts to the moon’s surface, following NASA criticism over delays with the company’s rocket development as the US races China to the lunar surface. Globalstar Inc. is exploring a potential sale and has held early talks with SpaceX among other potential suitors, according to people familiar with the matter. Some of the main moves in markets:

Stocks

The S&P 500 fell 1% as of 4 p.m. New York time The Nasdaq 100 fell 1.5% The Dow Jones Industrial Average fell 0.2% The MSCI World Index fell 1% Bloomberg Magnificent 7 Total Return Index fell 2.7% The Russell 2000 Index fell 0.8% Currencies

The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.3% to $1.1565 The British pound fell 0.4% to $1.3147 The Japanese yen fell 0.9% to 154.06 per dollar Cryptocurrencies

Bitcoin fell 4.4% to $106,600.48 Ether fell 6.4% to $3,697.78 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.09% Germany’s 10-year yield advanced two basis points to 2.64% Britain’s 10-year yield advanced three basis points to 4.42% The yield on 2-year Treasuries was little changed at 3.60% The yield on 30-year Treasuries advanced two basis points to 4.64% Commodities

West Texas Intermediate crude fell 0.4% to $60.25 a barrel Spot gold rose 2.4% to $4,025.38 an ounce ©2025 Bloomberg L.P.