Magnificent Seven Stocks Face Worst Day on Record Amid Tech Correction

Why Magnificent Seven Stocks are Having Their Worst Day on Record

The Magnificent Seven tumbled on Wednesday after earnings reports from Tesla (TSLA) and Alphabet (GOOGL) raised concerns about slowing earnings growth at America's tech titans. Shares of the Roundhill Magnificent Seven ETF (MAGS) fell as much as 5.8% Wednesday, their largest intraday decline since the ETF launched in April 2023. The tech giants, which were cumulatively worth about $16 trillion as of Tuesday's close, weighed heavily on the major indexes. The S&P 500 traded about 118 points lower with an hour left in the session; the Mag Seven accounted for approximately 81 of those points. Earnings season got off to a rough start for the group Tuesday afternoon when Tesla missed quarterly earnings estimates. The electric vehicle maker reported a 45% decline in profit as artificial intelligence (AI) development costs increased and average vehicle sales prices declined. Tesla shares were down more than 10% Wednesday as Wall Street parsed the earnings and digested a delayed rollout of Tesla's robotaxi. Spending on AI also sank Google-parent Alphabet's stock on Wednesday despite it beating earnings estimates for the quarter. The company reported spending $13.2 billion on property and equipment in the quarter, nearly double the same period a year ago. CFO Ruth Porat warned on a call with analysts that capital expenditures would remain near that level for the remainder of the year. Alphabet shares were down about 5%. Microsoft (MSFT) is the next of the seven to report earnings, with its report slated for Tuesday afternoon. Meta (META), Apple (AAPL), and Amazon (AMZN) are also scheduled to report next week. The Magnificent Seven is, as a group, expected to report earnings grew 30% in the second quarter, according to Bank of America analysts. That's well ahead of the 10% rate forecast for the entire S&P 500, but it would make the group's second consecutive quarter of slowing growth. Even before Wednesday's slide, mega-cap tech names, which had powered broader market gains all year, had started to fall out of favor as investors rotated into shares of smaller companies that stand to benefit most from widely anticipated rate cuts by the Federal Reserve. Despite the steep declines recently, all but one of the Magnificent Seven stocks are in positive territory for the year, with Tesla being the outlier.

Magnificent 7 Still Comprise Over 30% Of S&P 500 Despite Tech Correction - SPDR S&P 500 (ARCA:SPY)

The Magnificent 7 tech stocks have had a rough two weeks, falling collectively around 10%. Despite a market rebalancing away from large tech companies, reflected by an over 10% correction in the Roundhill Magnificent Seven ETF MAGS in the past two weeks, the so-called "Magnificent Seven" companies still comprise an outsized portion of the S&P 500. The Data: The Magnificent 7 comprises seven of the largest U.S. technology companies weighted heavily in the SPDR S&P 500 ETF Trust SPY. Apple Inc AAPL, 6.93% of the index. Microsoft Corp MSFT, 6.66% of the index. NVIDIA Corp NVDA, 5.95% of the index. Alphabet Inc G GOOGL, 4.45% of the index. Amazon.com Inc AMZN, 3.94% of the index. Meta Platforms Inc META, 2.45% of the index. Tesla Inc TSLA, 1.4% of the index. (Figures taken at the time of writing) All components have been in the red over the past 10 market sessions at a higher magnitude than the nearly 3% drop seen in the overall S&P 500. The small-cap Russell 2000 index is up nearly 10% in that period. Still, the Magnificent 7 collectively comprise around 32% of the S&P 500. Why it Matters: The data reflects a persistent market bullishness in artificial intelligence and Big Tech. The current correction has lessened Magnificent 7's year-to-date performance to a degree, but the Roundhill ETF, which tracks the seven companies, is still up over 35% in 2024. Several experts have predicted a larger market correction, describing the valuations of NVIDIA and other heavily weighted stocks as "bubble-ish." Also Read: Mortgage Rates Hit Lowest Point Since February As Investors Anticipate Fed Rate Cuts Photo: Shutterstock Market News and Data brought to you by Benzinga APIs