Stocks Decline on Weakness in Megacap Tech Stocks and Chipmakers

US equities extended declines to two-week lows, primarily driven by weakness in megacap technology and semiconductor stocks, alongside broader economic concerns. These concerns include a 20-year high in US job cuts, hawkish remarks from Fed Vice Chair Jefferson suggesting a cautious approach to rate cuts, and weaker-than-expected Chinese trade data. While Q3 earnings season shows 81% of S&P 500 companies beating forecasts, overall profit and sales growth are decelerating. Individual stock performance was mixed, with Microchip Technology, Block, and Intellia Therapeutics notably down on weak guidance, missed revenue, or clinical trial news, while Expedia Group and Globus Medical surged on strong results and outlooks. The ongoing US government shutdown and Supreme Court skepticism over the legality of Trump-era tariffs also contributed to market uncertainty.

Analysis

US equity indices, including the S&P 500, Dow Jones, and Nasdaq 100, extended their slide, reaching fresh 2-week lows with declines of -0.79%, -0.46%, and -1.13% respectively. This downturn was primarily driven by significant weakness in megacap technology stocks and semiconductor makers, which weighed heavily on the broader market.

Economic concerns are intensifying, highlighted by a report showing US companies announced the most job cuts in any October in over 20 years. Further dampening sentiment, Fed Vice Chair Philip Jefferson's "somewhat restrictive" interest rate comments suggested a slow approach to rate cuts, while weaker-than-expected China October exports (-1.1% y/y vs. +2.9% expected) signal slowing global growth. The ongoing, historically long US government shutdown also continues to adversely affect the economy and market sentiment.

While the Q3 earnings season shows 81% of S&P 500 companies beating forecasts, overall Q3 profit growth is projected at a modest +7.2% y/y, the smallest increase in two years, with sales growth also slowing. Specific companies like Microchip Technology (-6%) and Block (-11%) saw significant declines due to missed forecasts, contrasting with strong gains from Expedia Group (+17%) and Globus Medical (+23%) on robust results. Additionally, the US Supreme Court's skepticism regarding the legality of President Trump's reciprocal tariffs introduces potential future liabilities exceeding $80 billion for the US government.

Key Decisions for Investors

• Maintain a cautious stance given the broad market weakness, macroeconomic headwinds, and monetary policy uncertainty, which collectively point to continued volatility.
• Focus on companies demonstrating strong, verifiable earnings growth and positive forward guidance, as evidenced by outperformers like Expedia and Globus Medical, while exercising caution with those reporting significant forecast misses or clinical setbacks.
• Monitor developments regarding the US government shutdown and the Supreme Court's tariff ruling, as these present significant fiscal and trade policy risks that could impact market stability and specific sectors.