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Meta Platforms ( META ), Microsoft ( MSFT ) drag megacaps lower

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Amazon ( AMZN ) and Apple ( AAPL ) post quarterly revenue beat

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Estee Lauder ( EL ) shares drop to record low

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September PCE data in line with estimates

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Indexes down: Dow 0.9%, S&P 1.86%, Nasdaq 2.76%

(Updates post close)

By Abigail Summerville

Oct 31 (Reuters) -

All three U.S. stock indexes closed lower on Thursday after

Microsoft ( MSFT ) and Meta Platforms ( META ) highlighted growing artificial

intelligence costs that could hit their earnings, curbing

enthusiasm for megacaps that have fueled the market rally this

year.

Shares of Facebook-owner Meta Platforms ( META ) slipped

4.1% and Microsoft ( MSFT ) fell 6%, despite both companies

beating earnings estimates in results reported after the bell on

Wednesday.

Among other so-called Magnificent Seven megacap

technology companies, Amazon.com ( AMZN ) and Apple ( AAPL )

reported quarterly results after the market close. Amazon ( AMZN ) beat

revenue estimates, boosted by strong growth in its cloud

services unit. Apple ( AAPL ) also beat revenue and profit expectations

as iPhone sales grew.

Shares of Alphabet, which reported on Tuesday,

fell 1.9%.

"You had three of the Magnificent Seven all say they

basically have open-ended budgets for AI spend and investors

don't like to hear that," said Carol Schleif, chief investment

officer at BMO Family Office.

"The intermediate and longer-term implications of this

buildout are really important for U.S. long-term growth and

long-term productivity. ... In the short run, investors are

asking where's the profit from it?"

Microsoft ( MSFT ) and Meta both said

capital expenses

were growing due to AI investments, which could reduce

profitability.

The Dow Jones Industrial Average fell 378.08

points, or 0.90%, to 41,763.46. The S&P 500 lost 108.22

points, or 1.86%, at 5,705.45 and the Nasdaq Composite

dropped 512.78 points, or 2.76%, to 18,095.15.

The Personal Consumption Expenditures price index, the

Federal Reserve's preferred inflation metric, rose 0.2% in

September, in line with economists' expectations. However, the

core figure was 2.7% year-over-year, slightly above the 2.6%

forecast, while consumer spending increased a little more than

expected.

After the data, traders stuck to bets for a 25-basis-point

rate reduction in the Fed's Nov. 6-7 meeting.

"We do expect them to cut by a quarter next week because

there is nothing in the data this week that should throw them

off of that," Schleif said.

Information technology led declines among sectors,

but upbeat results from ConocoPhillips ( COP ) and Entergy ( ETR )

lifted energy and utilities.

An index of chip stocks fell 4%, led by a 17.4%

plunge in Monolithic Power Systems ( MPWR ) shares after the

maker of power control products and semiconductors used in

vehicles reported its results. Nvidia ( NVDA ) also dropped

4.7%.

The VIX, Wall Street's "fear gauge," ticked up as

investors braced for more volatility in the next few weeks from

corporate results and the Nov. 5 U.S. presidential election

followed by the Fed's policy-setting meeting.

Estee Lauder ( EL ) posted its worst day on record, dropping

20.9% after the cosmetics company withdrew its 2025 annual

forecasts.

Shares of Uber Technologies ( UBER ) fell 9.3% after the

ride-hailing company forecast fourth-quarter gross bookings

below expectations.

Intel ( INTC ) reported earnings after the close that were

weighed down by impairment and restructuring charges.

Declining issues outnumbered advancers by a 2.66-to-1 ratio

on the NYSE. There were 106 new highs and 97 new lows on the

NYSE.

The S&P 500 posted 24 new 52-week highs and nine new

lows, while the Nasdaq Composite recorded 59 new highs and 159

new lows.