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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

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Indexes down: Dow 0.65%, S&P 500 1.62%, Nasdaq 2.58%

(Updates to midafternoon)

By Abigail Summerville

Oct 31 (Reuters) -

U.S. stocks slumped on Thursday after Microsoft ( MSFT ) and Meta

Platforms ( META ) highlighted growing artificial intelligence costs that

could affect their earnings, curbing enthusiasm for megacap

stocks that have fueled the market rally this year.

Shares of Facebook-owner Meta Platforms ( META ) dropped

4.5%, while Microsoft ( MSFT ) fell 5.6%, 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 ) fell 3.6% and Apple ( AAPL )

dropped 1.4% ahead of their quarterly results, due

after the market close. Shares of Alphabet, which

reported on Tuesday, fell 1.7%.

"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.

The benchmark 10-year Treasury note yield also

rose, breaching 4.3%, further pressuring equities.

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.

By 2:15 p.m. ET (0815 GMT), the Dow Jones Industrial

Average fell 275.71 points, or 0.65%, to 41,865.83. The

S&P 500 lost 94.37 points, or 1.62%, at 5,719.29 and the

Nasdaq Composite slid 480.17 points, or 2.58%, to

18,127.76.

The information technology sector slumped

3.4%, on track for its worst day since early September. Upbeat

results from

ConocoPhillips ( COP )

and

Entergy ( ETR )

lifted energy and utilities.

An index of chip stocks slumped 4.4%, led by a 19%

loss in Monolithic Power Systems ( MPWR ) following its results.

Nvidia ( NVDA ) lost 4.6%.

The VIX, Wall Street's "fear gauge," touched its

highest since early September 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 ) plummeted 20.5%, on track for its worst

day on record, after the cosmetics company withdrew its 2025

annual forecasts.

Shares of Uber Technologies ( UBER ) plunged 11.4% after the

ride-hailing company forecast fourth-quarter gross bookings

below expectations.

Declining issues outnumbered advancers by a 2.24-to-1

ratio on the NYSE, and by a 2.65-to-1 ratio on the Nasdaq.

The S&P 500 posted 23 new 52-week highs and eight new

lows while the Nasdaq Composite recorded 51 new highs and 138

new lows.