US STOCKS-Wall Street closes lower to end rocky week

Wall Street's key indices finished lower on Friday, capping off a turbulent week for the markets, particularly for technology stocks heavily influenced by the artificial intelligence (AI) sector. As investors prepare for a busy upcoming week filled with corporate earnings reports and a Federal Reserve meeting on interest rates, the market showed signs of instability.

The Nasdaq Composite experienced a modest decline, following its largest single-day drop since June the previous day, amid rising concerns regarding the costs of financing substantial investments in AI. Meanwhile, the technology sector within the S&P 500 managed to gain 0.35% on Friday.

However, many sectors of the S&P 500 faced declines, with the consumer staples and consumer discretionary sectors dropping by over 1%, alongside the financial sector. Looking ahead, approximately one-third of S&P 500 companies are set to report their quarterly earnings next week, including major players like Alphabet, Microsoft, and Amazon. Investors will be closely scrutinizing these companies' forecasts for capital expenditures, particularly in AI.

Kristina Hooper, the chief market strategist at Man Group, commented on the situation: "There is still fallout from the questioning of the AI trade. There's certainly the potential that we see less invested in an AI data center build-out next year than has been projected. So I certainly think that's giving pause."

The Dow Jones Industrial Average dropped by 652.82 points, or 1.23%, closing at 52,215.16. The S&P 500 fell by 39.75 points, or 0.52%, ending at 7,623.68, while the Nasdaq Composite lost 53.52 points, or 0.21%, to finish at 25,955.34. For the week, the S&P 500 declined by 0.5%, and the Nasdaq fell by 0.7%. Conversely, the Dow rose by 0.4%, marking its third consecutive weekly gain.

Telecommunications stocks also saw a decline, impacting the communication services sector, following reports that SpaceX was seeking to establish thousands of cell sites for a new wireless carrier. Shares of AT&T and T-Mobile both dropped nearly 8%, while Verizon fell by 1.2%. In contrast, SpaceX shares increased by 1.9%. US cell tower operators experienced gains, with Crown Castle up 9% and American Tower rising by 4%.

The energy sector, however, rose by 2.5%, reaching a record high, as Brent crude oil prices surged to their highest level since late April due to concerns over potential disruptions to energy supplies in the Middle East following Houthi attacks in Saudi Arabia.

American Express shares declined by 3.7%, contributing to the Dow's losses, despite the company increasing its profit forecast and announcing plans to cut 5% of its workforce. On a positive note, SLB shares rose by 7% after the oilfield services company surpassed Wall Street's profit expectations for the third quarter.

Recent data from the University of Michigan indicated that US consumer sentiment dipped closer to a record low in October, as rising prices linked to the Middle East conflict negatively affected households' economic outlooks.

The focus remains on the ongoing earnings season, with strong corporate profit growth supporting gains in major equity indices this year. According to LSEG IBES data, S&P 500 companies are projected to report an increase in earnings of over 32% for the third quarter.

The Federal Reserve is anticipated to maintain steady interest rates when it releases its policy statement on Wednesday. Investors are keenly awaiting hints regarding potential rate hikes at the central bank's December meeting. Additionally, attention is turning to the midterm elections on November 3, which will determine control of the US Congress.

On the New York Stock Exchange, declining issues outnumbered advancers by a ratio of 1.72-to-1, while on the Nasdaq, the ratio was 1.57-to-1 in favor of declining issues. The S&P 500 recorded 18 new 52-week highs and 8 new lows, while the Nasdaq Composite saw 74 new highs and 334 new lows. Trading volume on US exchanges reached 15.4 billion shares, below the 20-day average of 17.2 billion shares.