Tech stock sell-off wipes out Wall Street’s October gains

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US stocks are on course to wipe out all their gains for October, as a sell-off in tech heavyweights on Thursday put Wall Street’s main indices on track for their biggest daily drop in almost two months.

In the final trading session of the month, the S&P 500 was down 1.6 per cent in mid-afternoon trading, while the tech-heavy Nasdaq Composite dropped 2.6 per cent.

Big Tech stocks led the Nasdaq lower, with Microsoft trading down 5.5 per cent in the afternoon session after its quarterly earnings outlook disappointed. Facebook parent Meta, which also reported on Wednesday, was 4.7 per cent lower.

Investors are expecting earnings reports from two other trillion-dollar tech groups, Apple and Amazon, after the bell. Both were also trading lower on Thursday afternoon.

The moves in the S&P 500 and Nasdaq, which marked the biggest daily drops for the indices since September 6, left them down 0.7 per cent and 0.4 per cent, respectively, month-to-date.

An October decline would end a five-month winning streak for the S&P 500, during which time US stocks had rallied on a combination of expectations that the Federal Reserve would begin to ease monetary policy and data signalling that the economy was on course for a “soft landing”.

The more optimistic take on the economic outlook has been one contributing factor to a sell-off in US government bond markets, which in turn has pushed Treasury yields and the dollar to their highest levels in about three months.

The market moves come just days ahead of next Tuesday’s US presidential election, where Kamala Harris and Donald Trump have vied to convince voters that their policies represent better stewardship of the economy and in turn a better outcome for markets.

Although Thursday’s decline set US markets up to end October on a down note, the months-long rally had pushed the S&P 500 and Nasdaq to record closing highs during the month. On Thursday afternoon they were trading about 2.5 per cent and 3 per cent, respectively, below their peaks.

The yield on the policy-sensitive two-year Treasury edged up to 4.16 per cent, leaving it up 0.52 percentage points and on course for its biggest monthly increase since February 2023.

The yield on the benchmark 10-year Treasury was on track to register its biggest monthly rise since September 2022, with a 0.5 percentage point increase to about 4.27 per cent.

The dollar, measured against a basket of six major currencies, has gained 3.3 per cent so far in October and was on track for its biggest monthly advance since April 2022.