Intel's Earnings Miss Triggers S&P 500 Slide Ahead of Midterms

Intel shares dropped 30% on Friday, leading a sharp decline in the U.S. stock market that threatened to erase all gains recorded during October. The sell-off centered on the semiconductor maker, which posted a profit forecast for the final quarter of 2026 that missed analyst estimates. This move pushed the S&P 500 down 1.9% and the Nasdaq composite down 3.1%, marking the Nasdaq's worst day since June.

CEO Lip-Bu Tan stated that the personal computer industry continues to face pressure, explaining the company's cautious outlook despite a stronger profit for the most recent quarter than expected. Intel's decline was the primary driver for the broader market weakness, with the stock approaching its worst single-day drop since 1974. The market's instability occurred just days before the midterm elections, a period when President Donald Trump has historically tied his political success to stock market performance.

The drop in Intel shares was accompanied by losses in other major technology companies that have invested heavily in artificial intelligence. Nvidia, the leading chip supplier for AI data centers, fell 4.8%, exerting the heaviest downward force on the S&P 500. Investors are questioning whether the hundreds of billions of dollars spent on AI infrastructure will generate sufficient returns to justify the cost. High interest rates also raised concerns that they could slow the construction of new data centers.

Amazon reported a weaker profit for the summer than analysts predicted, and its stock sank 2.1%. The company disclosed that it used $42.4 billion in free cash flow over the previous 12 months. It spent $94.8 billion on property and equipment, primarily for AI technology. This follows a record 12% drop in Alphabet shares the previous day, which cited similar massive cash burn for AI investments. Portfolio manager Joe Tigay noted in a client memo that the market is moving from the speculative phase of the AI trade into a phase focused on proof of performance.

The tech sell-off coincided with a downturn in the cryptocurrency sector. Bitcoin prices fell toward $77,000 from more than $86,000 earlier in the month. A U.S.-based blockchain intelligence firm identified a North Korean unit as the likely culprit behind a hack on Binance, the world's largest crypto exchange. The attack impacted more than $6 billion worth of digital assets. Coinbase Global shares fell 13.4% despite beating quarterly profit expectations, while Strategy, which holds about 4% of the total bitcoin supply, dropped 8.7% after announcing its CFO would resign for personal reasons.

Outside the technology sector, stocks showed more resilience. Many non-tech companies rallied after reporting stronger summer profits than forecast. Nearly as many stocks in the S&P 500 rose as fell. ExxonMobil climbed 2% and Chevron added 1.7% after both oil giants exceeded analyst expectations. Mondelez International rose 3.9% on stronger-than-expected growth for brands like Oreo and Ritz, while Colgate-Palmolive climbed 3.6% aided by higher product prices globally.

In the bond market, Treasury yields decreased, signaling that investors sought safety in U.S. government bonds. The yield on the 10-year Treasury fell to 4.94% from 4.98% late Thursday. This decline occurred even though oil prices rose, a factor that typically pushes yields higher by worsening inflation concerns. Brent crude oil prices increased 3% to $114.11 per barrel, staying near the high end of its range since the war with Iran began.

Global stock markets reflected the U.S. weakness, with European indexes mostly lower after sharper declines in Asia. South Korea's Kospi index dropped 3.5% as AI concerns hit its tech-heavy market. Japan's Nikkei 225 fell 2.1% after the Bank of Japan decided to keep interest rates steady, mirroring recent moves by the Federal Reserve and the European Central Bank. The Hang Seng index in Hong Kong climbed 1.5%.

The S&P 500 remains only 3.1% below its all-time record, which was set earlier this month. This proximity to the peak has boosted the value of workers' 401(k) accounts. However, the recent volatility highlights the tension between high expectations for corporate profits and the real-world costs of inflation and fuel prices that consumers are facing.