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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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VIX rises to highest since September

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Indexes down: Dow 0.84%, S&P 500 1.60%, Nasdaq 2.50%

(Updated at 11:56 a.m. ET/1556 GMT)

By Lisa Pauline Mattackal

Oct 31 (Reuters) -

Wall Street tumbled on Thursday, after warnings from

Microsoft ( MSFT ) and Meta Platforms ( META ) about escalating AI costs curtailed

enthusiasm for megacap stocks, which have driven the market

rally this year.

Shares of Facebook-owner Meta Platforms ( META ) dropped 4%,

while Microsoft ( MSFT ) fell 5.6%, despite both companies

beating earnings estimates in results reported after the bell on

Wednesday.

"The market, overall, has been disappointed with mega

tech guidance, especially with regard to Meta's AI expenditures

as well as slower-than-anticipated integration of AI into

Microsoft's ( MSFT ) cloud platform," said Quincy Krosby, chief global

strategist for LPL Financial.

The yield on the benchmark 10-year Treasury note

also rose, past 4.3%, further pressuring equities.

Meanwhile, the Personal Consumption Expenditures price

index, the Federal Reserve's preferred inflation metric, rose

0.2% in September, in line with economists' expectation.

However, the core figure was 2.7% year-over-year, slightly

higher than 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.

"Despite some stickiness to core PCE measures, overall

PCE continues to trend lower... while December's (Federal

Reserve) rate cut may not be such a certainty, a rate cut in

November is firmly on the table," said Bret Kenwell, eToro U.S.

Investment Analyst.

Microsoft ( MSFT ) and Meta both said their

capital expenses

were growing due to AI investments, which could impact

profitability, even as investors look for quick returns on the

billions already poured in.

Other so-called Magnificent Seven stocks slipped. Amazon.com ( AMZN )

was down 3.4% and Apple ( AAPL ) dropped 1.4% ahead of

quarterly results from both, due after market close.

Although betting on AI-driven tech stocks propelled Wall

Street to record highs this year, investor exuberance has meant

stocks are trading at incredibly expensive valuations. Meta and

Microsoft's ( MSFT ) warnings point to the challenges companies face in

pleasing investors.

The Dow Jones Industrial Average fell 355.91

points, or 0.84%, to 41,785.63, the S&P 500 lost 92.83

points, or 1.60%, to 5,720.84 and the Nasdaq Composite

lost 464.96 points, or 2.50%, to 18,142.97.

The Information Technology sector slumped

3.3%, on track for its worst day since early September. While

upbeat results from

ConocoPhillips ( COP )

as well as

Entergy ( ETR )

lifted Energy and Utilities.

An index of chip stocks slumped 4.3%, led by an 18.2%

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

Nvidia ( NVDA ) lost 4.6%.

The day's losses put all three main indexes on track for

monthly declines.

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

highest since early September as investors brace for more

volatility from corporate results, the upcoming U.S.

presidential election as well as the central bank's November

meeting in the next few weeks.

In other results-driven moves, Estee Lauder ( EL )

plummeted 19.6%, on track for its worst day on record, after the

cosmetics company

withdrew its 2025 annual forecasts.

Shares of Uber Technologies ( UBER ) plunged 11.7% after

the company

forecast

fourth-quarter gross bookings below expectations.

Declining issues outnumbered advancers by a 2.8-to-1

ratio on the NYSE, and by a 3.08-to-1 ratio on the Nasdaq.

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

lows, while the Nasdaq Composite recorded 47 new highs and 120

new lows.