NEW YORK — U.S. stock indexes faced declines on Wednesday as major tech companies reported disappointing profit results, significantly impacting market sentiment.
The S&P 500 dropped 1.6% in midday trading, marking its fifth loss in six days. The Dow Jones Industrial Average fell by 372 points, or 0.9%, while the Nasdaq composite saw a decline of 2.5%.
Tesla emerged as a primary drag on the market, plummeting 11.4%. The electric vehicle manufacturer reported a staggering 45% decline in profits compared to last year, falling short of analysts’ expectations.
Alphabet also took a hit, dropping 4.3%, despite beating profit and revenue forecasts for the latest quarter. Analysts cited weaker-than-anticipated growth in YouTube advertising revenue as a concerning factor. Additionally, the company’s share price has surged nearly 50% over the past 12 months, leading to elevated profit expectations.
Investors are particularly focused on the “Magnificent Seven”: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. These stocks play a crucial role in driving the S&P 500’s current growth trajectory as other stocks struggle with high interest rates.
Market participants hope that if the momentum for these leading tech stocks falters, other sectors can emerge to stabilize the market. Recent discussions surrounding potential interest rate cuts have invigorated smaller stocks, aiding a market recovery.
The Russell 2000 index, which focuses on smaller companies, has gained at least 1% in seven of the last 10 days, although it slipped 0.4% on Wednesday. This rise correlates with easing Treasury yields, bolstered by expectations of slowing inflation that may prompt the Federal Reserve to lower interest rates.
On Wednesday, Treasury yields saw a slight decrease following preliminary data indicating a contraction in U.S. manufacturing activity, while services industries continued to grow. This data reflects a “Goldilocks” economic scenario, suggesting moderation that could relieve inflation pressures without triggering a recession.
However, uncertainty looms over the upcoming November elections, adding complexity to the market landscape.
A report also indicated unexpected weakness in sales of new U.S. homes, countering economists’ forecasts for growth.
The yield on the 10-year Treasury fell to 4.21%, down from 4.25% late Tuesday and 4.70% in April, marking a notable shift that has provided support to stock prices.
In contrast, AT&T shone bright, climbing 4.4% after meeting profit expectations for the quarter. Similarly, Mattel surged 10.3%, exceeding profit forecasts thanks to strong sales in its Fisher-Price and Hot Wheels lines.
Despite the potential for gains in other sectors, the challenge remains for these companies to outperform the significant declines in major tech stocks, given their substantial market influence.
Nvidia experienced a drop of 3.7%, impacting the S&P 500 significantly due to its market capitalization exceeding $3 trillion amid a growing push into artificial intelligence technology.
Elsewhere, Visa fell 4% after reporting revenue that missed analysts’ targets, while Lamb Weston faced a staggering 26.9% loss—the most severe on the S&P 500—after revealing weaker-than-expected profit and anticipating ongoing challenges from decreased restaurant patronage and inflationary pressures on menu prices.
Internationally, stock markets across Europe and Asia reported broad declines, including France’s CAC 40 index, which fell 1.1% amid disappointing sales results from luxury brand LVMH.
