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

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Estee Lauder ( EL ) on track for worst day on record

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September PCE data in line with estimates

(Updates to close)

By Abigail Summerville

Oct 31 (Reuters) -

Major 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 ) and

Microsoft ( MSFT ) fell, despite both companies beating earnings

estimates in results reported after the bell on Wednesday.

Other so-called Magnificent Seven megacap technology

stocks also slipped. Amazon.com ( AMZN ) and Apple ( AAPL )

dropped ahead of their quarterly results, due after the market

close. Shares of Alphabet, which reported on Tuesday,

also fell.

"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 their

capital expenses

were growing due to AI investments, which could reduce

profitability.

According to preliminary data, the S&P 500

lost 110.39 points, or 1.90%, to end at 5,703.28 points,

while the Nasdaq Composite lost 522.07 points, or 2.81%,

to 18,085.86. The Dow Jones Industrial Average

fell 380.02 points, or 0.93%, to 41,761.52.

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 November 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, led by plunging shares

in Monolithic Power Systems ( MPWR ) after the maker of power

control products and semiconductors used in vehicles reported

its results. Nvidia ( NVDA ) also dropped.

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 ) slumped, on track for its worst day on

record, after the cosmetics company withdrew its 2025 annual

forecasts.

Shares of Uber Technologies ( UBER ) plunged after the

ride-hailing company forecast fourth-quarter gross bookings

below expectations.