Dow closes at lowest since March as S&P 500 joins Nasdaq in correction territory

Both the S&P 500 and Nasdaq entered correction territory this week, and are poised for their worst October performance since 2018.

What drove markets

U.S. stocks endured another difficult week, with the S&P 500 falling during four out of five trading days to log its biggest weekly drop in more than a month, according to Dow Jones Market Data.

The S&P 500 logged its lowest close since May 24, according to Dow Jones data, while the Dow saw its lowest close since March 28. The S&P 500 has also fallen 10.3% since its July 31 closing high, leaving it in correction territory.

Investors typically define a correction as a drop of 10% or more from a recent high.

See: S&P 500 index enters a correction. Here’s what it means for future performance.

All three major U.S. equity indexes finished lower on the week, the sixth such decline in eight, as a selloff that began in early August continued to gather pace.

The market got a brief reprieve earlier after Amazon.com
AMZN,
+6.83%
reported earnings that surpassed expectations on Wednesday evening, which showcased the company’s progress in lifting margins, both in its retail business and in cloud. Intel
INTC,
+9.29%
also beat estimates.

Strong numbers from Amazon helped lift the Nasdaq, which outperformed the Dow by 1.5 percentage points, the largest such margin since Aug. 21, according to Dow Jones data.

But Amazon earnings ultimately weren’t enough to assuage investors’ concerns about soft sales volumes and expected difficulties with profit-margin expansion at America’s largest companies.

“I think the grand totality is you’re coming off an earnings week where some of the old economy companies were telling you that volumes were soft heading into the fourth quarter, while the majority of big cap tech stocks have told you they’re going to have flat margins next year,” said Victor Cossel, macro strategist at Seaport Research Partners, during an interview with MarketWatch.

Meanwhile, investors have largely disregarded “backwards-looking” economic data released this week, including a report on U.S. GDP that showed the economy grew at the fastest pace in more than two years over the summer. Although inflation numbers included in Friday morning’s PCE data release raised some eyebrows, Cossel said.

Markets also remained focused on the Israel-Hamas conflict, as earlier reports about a potential ceasefire were not confirmed. Instead, Israel is expanding its ground operations in Gaza.

Elevated geopolitical risks have made investors less willing to hold stocks heading into the weekend, strategists said.

“The one difficulty for the market today, going into the weekend, is concern that the situation in the Middle East could deteriorate and widen further considering a U.S. military strike against two Syrian structures, following attacks on U.S. troops in the region,” said Quincy Krosby, chief global strategist for LPL Financial.

In U.S. economic data, the latest PCE index, which included the Federal Reserve’s preferred inflation gauge, showed the cost of goods and services rose a higher-than-expected 0.4% in September. A measure of core inflation, meanwhile, was in line with expectations.

Data also showed consumer spending rose a sharp 0.7% in September, a sign of spending strength previously reflected in retail-sales data.

Economists analyzing the report concluded that while the increase in spending looked favorable, it came at the expense of declining savings, adding to concerns about the strength of the U.S. consumer heading into the final months of 2023.

Meanwhile, survey data from the University of Michigan showed consumer sentiment improved slightly at the end of October, while higher gas prices left people more worried about inflation.

Companies in focus

• Amazon.com Inc. shares
  AMZN,
  +6.83%
  rose after the e-commerce giant delivered a massive earnings beat.

• Intel Corp.’s stock
  INTC,
  +9.29%
  jumped after the chip maker beat expectations for its third quarter and delivered an upbeat forecast for the current quarter.

• Ford Motor Co. shares
  F,
  -12.25%
  fell after the automaker withdrew guidance, citing the pending agreement with the United Auto Workers, and revealed a $1.3 billion loss for its electric-vehicle unit.

• Exxon Mobil Corp. 
  XOM,
  -1.91%
  saw its shares decline Friday after the oil giant reported third-quarter profit and revenue that missed expectations as production fell, while free cash flow beat by a wide margin.

• Chevron Corp.’s stock 
  CVX,
  -6.72%
  fell after the oil giant posted third-quarter profit that fell far short of estimates.