S&P 500 and Nasdaq 100 Slip as Strong Earnings Collide With AI Bubble Fears and $117 Oil

Major US indices pulled back this week, even as earnings season pointed to strong performance by American companies. The S&P 500 dropped to 7,623, its lowest level since October 1 and 2.8% below its peak for the year. The tech-heavy Nasdaq 100 tumbled to 28,957, down 7.5% from its year-to-date high.

Earnings Season Shows Companies Are Doing Well

Hundreds of American companies have published strong financial results this month, a sign that consumers and companies are spending. 

FactSet (NYSE:FDS) data shows that 24% of all companies in the S&P 500 Index have already released their earnings. The blended earnings growth is 29.5%. If this is the final number, it will mark the third quarter in which growth has been above 25%. 

Chances are that the final earnings growth figure will be higher than this since many technology and energy companies are yet to publish their numbers. Top technology companies like Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU) are reporting some of their best numbers as demand for GPUs and memory rises. 

The earnings season will intensify in the coming weeks. Top Magnificent Seven companies like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG), and Amazon (NASDAQ:MSFT) will publish their results next week. Meta Platforms and Tesla have already released their Q3 results. 

Other large companies that will release their numbers next week are Visa, Mastercard, AbbVie, Coca-Cola, Verizon, and SK Hynix. 

AI Bubble Fears and Soaring Crude Oil Prices

The S&P 500 and Nasdaq 100 indices have struggled because of the ongoing AI bubble fears. Ken Griffin, the billionaire founder of Citadel, warned that we are in a bubble, joining other top experts like Ray Dalio and Michael Burry in sounding the alarm. As a result, the biggest companies in the AI space, like Micron, CoreWeave, and Nebius, were among the top laggards this week.

On the positive side, some other experts believe that the AI fears are not justified. In a statement, Stephen Schwarzman, the founder of Blackstone (NYSE:BX), said that the AI boom was real, pointing to the rising demand from consumers. FundStrat’s Tom Lee believes that the AI correction is nearing its end. 

US stocks are also weighed by rising oil prices, with Brent and the West Texas Intermediate (WTI) rising to $117 and $103, respectively. The rising oil prices mean that inflation will remain at elevated levels, pushing the Federal Reserve to maintain high interest rates for longer. 

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