(Bloomberg) — The latest earnings reports are fanning two worries that were already gnawing away at the US stock market: That the euphoria about artificial intelligence had run too far and that — at some point — consumers spending will start to stall.
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While profits overall are still expanding at a solid pace and banks’ earnings have continued to swell, those concerns have derailed a stock-market rally that until this month kept pushing major indexes to fresh record highs.
The Nasdaq 100 Index slid 2.6% in its third straight weekly loss after Alphabet Inc.’s results stoked a broader concern about how long it will take for investments in artificial intelligence to pay off. At the same time, updates from Southwest Airlines Co., United Parcel Service Inc., Whirlpool Corp. stoked worries about a potential pullback by consumers.
That’s heightened the stakes as earnings continue to roll out next week, including those from the tech bellwethers Microsoft Corp., Meta Platforms Inc., Amazon.com Inc. and Apple Inc.
“The setup for the next week is the bar is as high as it’s ever been and the headwinds are as strong as they’ve ever been,” said Max Gokhman, senior vice president at Franklin Templeton Investment Solutions.
The sentiment is a shift from what held sway during much of this year, when optimism about soft landing in the economy and investor obsession with all things artificial intelligence pushed the S&P 500 into 38 records.
The direction of the economy has remained well intact, with recent data showing solid economic growth and easing inflationary pressure. That bolstered bets that the Federal Reserve will start cutting rates sooner than expected, fueling gains in small-cap stocks that generally have a higher debt burden.
To be sure, there have been plenty of bright spots in the earnings picture. About 69% of companies in the S&P 500 that have already posted their results reported higher per-share earnings than a year ago, data compiled by Bloomberg Intelligence as of Friday morning show. And banks surpassed the sell-side’s…
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