Tech Stocks Plummet: Nasdaq Suffers Worst Day Since 2022 Amid AI Concerns

$1 trillion rout hits Nasdaq 100 over AI jitters in worst day since 2022 - ET Telecom

Internet 5 min read $1 trillion rout hits Nasdaq 100 over AI jitters in worst day since 2022 The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense. The company's stock sank more than 5% for its worst performance since January. Tesla Inc. plunged more than 12% after Chief Executive Officer Elon Musk offered scant details about his company's self-driving vehicle initiative. Investors soured on the promise of artificial intelligence Wednesday, sparking a $1 trillion rout in the Nasdaq 100 Index as questions swirled over just how long it will take for the substantial investments in the technology to pay off. The Nasdaq indexes tumbled more than 3% for the worst days since October 2022. The list of laggards was a who's-who of AI technology darlings, led by semiconductor companies such as Nvidia Corp., Broadcom Inc. and Arm Holdings Plc. The selloff was triggered by a middle-of-the-road earnings report from Alphabet Inc. late Tuesday that featured a bloated capital expense. The company's stock sank more than 5% for its worst performance since January. Tesla Inc. plunged more than 12% after Chief Executive Officer Elon Musk offered scant details about his company's self-driving vehicle initiative.

Big Tech selloff slams Nasdaq with worst day since 2022

A stock-market selloff intensified Wednesday, wiping out hundreds of billions of dollars in value from the Magnificent Seven group of tech giants and pushing the Nasdaq Composite to its first decline of 3% or more in 400 trading days. After a frenzy over artificial intelligence sent stocks to new heights in the first half of the year, investors have suddenly grown more skeptical of its potential payoffs. Traders trained those newfound doubts Wednesday on Tesla, where a delayed robotaxi rollout helped shares slide 12% in a move that reverberated across the technology sector. The thrashing left the S&P 500 2.3% lower, its worst day since December 2022, while the Dow Jones Industrial Average lost 1.2%, or 504 points. The tech-heavy Nasdaq's 3.6% decline was its largest skid since October 2022, when Federal Reserve officials were cranking up interest rates to tamp down inflation. Stocks had climbed to records since then on the back of AI optimism. Then a cool inflation report this month convinced many traders that rate cuts are around the corner, sparking a shift of money to other sectors in what could be a stock-market rotation of historic proportions. Disappointing earnings reports by Tesla and Alphabet provided the spark for Wednesday's fireworks, which pushed each member of the Magnificent Seven into the red. The stocks collectively lost $768 billion in market value, according to Dow Jones Market Data, the biggest such wipeout on record since Meta Platforms went public as Facebook in 2012. The market's reaction Wednesday to the Google owner's earnings, which slightly outpaced estimates but sparked AI-spending concerns, showcased the sky-high bar for the group as investors await results from Nvidia, Microsoft and others. "You can't just meet estimates. You have to beat estimates,"said David Lundgren, portfolio manager at Little Harbor Advisors. Referring to the unofficial projections shared on Wall Street, he added, "You have to beat the whisper number, frankly." The vibe shift on Wednesday rippled through stocks linked to the emerging AI supply chain for semiconductors and other products. Super Micro Computer dropped by 9.2%, while Broadcom fell 7.6%. Qualcomm and Advanced Micro Devices each fell by more than 6%. The ascendance of such technology firms over the past 18 months has shielded broader indexes from other industries that have underperformed. On Wednesday, that dynamic flipped to some extent, with the S&P 500's utilities, consumer staples, health-care and energy sectors all finishing in the green. Defense contractor Lockheed Martin rose 2.8%, extending its post-earnings bump and notching an all-time high. AT&T logged its biggest gain of the year. Visa slipped by 4% after the credit-card company reported quarterly revenue growth that came in below analysts' estimates. As tech stocks have been battered in recent weeks, investors have increasingly shifted money toward small and midsize firms. The Russell 2000 index declined 2.1% Wednesday, but its 10.9% outperformance of the S&P 500 over the past 11 trading sessions is the largest such margin in more than 24 years, according to Dow Jones Market Data. "Equity market leadership has experienced a dramatic shift in recent weeks," John Lynch, chief investment officer of Comerica Wealth Management, wrote in a recent note. Many analysts believe smaller firms, which tend to be more exposed to higher rates in the form of floating-rate debt, could be among the beneficiaries of rate cuts. Yields on 10-year Treasurys, a rough proxy for investors' rate expectations, held roughly steady Wednesday at 4.285%. In commodity markets, oil prices ticked upward by 0.8%, closing at $77.59 a barrel, after trading Tuesday at their lowest level since early June. Copper futures, which jumped in price earlier this year due to projections of an AI-driven data-center boom, retreated for an eighth consecutive day. Investors evaluating whether the stock-market rotation has legs will parse earnings Thursday, from companies including Northrop Grumman, Honeywell International and Norfolk Southern. Colgate-Palmolive, Bristol Myers Squibb and 3M are among those due Friday. For now, many traders expect more turbulence ahead. The CBOE Market Volatility Index, known as Wall Street's fear gauge, rose Wednesday at its steepest rate since 2022. José Torres, senior economist at Interactive Brokers, told clients that factors are lining up for a potentially violent correction to stocks to continue. "Risk-off sentiments are indeed dominating Wall Street," he said.

Stock market sees worst day since 2022 as Tesla, Google-parent Alphabet sink

Traders work on the floor of the New York Stock Exchange (NYSE) on Monday in New York.Spencer Platt / Getty Images U.S. stocks had their worst day since 2022 Wednesday amid a broad pullback in tech companies as Wall Street traders sought to reduce their exposure to firms that have made big bets on artificial intelligence. The tech-heavy Nasdaq index closed down 3.6%, while the broader S&P 500 index closed down 2.3% -- both the worst performance in more than 18 months. The Dow Jones Industrial Average fell 1.25%. The rout was led by Tesla, whose shares fell 12.3% for its worst day since 2020; and Google parent Alphabet, which fell more than 5% for its worst day since January. Tesla reported Tuesday afternoon that auto revenues fell 7% compared with the previous quarter, and CEO Elon Musk said in a follow-up earnings call that the company's planned robotaxi rollout would be pushed back. Although Alphabet reported earnings Tuesday that were in line with analysts' expectations, traders appeared to seize on remarks CEO Sundar Pichai made on the company's earnings call that signaled the tech world's booming investments in artificial intelligence were not going to pay off in a short time frame. "I think we are in this phase where we have to deeply work and make sure on these use cases [for AI products], on these workflows, we are driving deeper progress on unlocking value, which I'm very bullish will happen," Pichai said. "But these things take time." Steve Sosnick, chief strategist at Interactive Brokers financial group, said Wall Street took that line as a signal to sell off shares that had enjoyed the frenzied growth that tech stocks have been experiencing in recent months. "We're seeing some nervous profit taking in some of the stocks that have been leveraged to AI that a lot of investors have come to rely on as a consistent source of stock market gains," Sosnick told NBC News. Other major tech names seeing major losses Wednesday included Nvidia, the computer chip-maker powering much of the AI revolution, whose shares fell more than 6% for their worst day since 2022; Facebook parent Meta was down 5%; Microsoft fell 3.5% and Amazon lost 3%. Wednesday's sell off comes amid renewed expectations for an interest-rate cut from the Federal Reserve in response to a slowing economy. While traders now say the Fed's first cut of the post-pandemic period is virtually guaranteed by September, former Federal Reserve Bank of New York President Bill Dudley wrote Wednesday that the Fed needs to strongly consider announcing a cut at its meeting on July 31. "Although it might already be too late to fend off a recession by cutting rates, dawdling now unnecessarily increases the risk," wrote Dudley, now an executive at UBS financial group, in a column for Bloomberg News. Sosnick said Wednesday's stock sell off was not a total referendum on the broader state of the economy. Year to date, the S&P 500 has still seen healthy gains of about 15%, while the NASDAQ is up about 18% and the Dow Jones Industrial Average is up 6%. "This is much more about a little bit of vertigo in names that have climbed a lot this year," Sosnick said. But signs of a broader economic pullback continue to mount: The U.S. unemployment rate is rising, excess savings from the pandemic have been exhausted and consumer borrowing stress is now at fresh highs. "We expect relatively weak economic growth in the second half of 2024 and early 2025," Ian Shepherdson, chief economist at Pantheon Macroeconomics research group, wrote in a note to clients Wednesday.

Nasdaq drops over 3% to post its worst day since 2022; Alphabet, Tesla, other tech stocks lead sell-off | Stock Market News

US stock market tumbled on Wednesday dragged by a sell-off in megacap technology stocks after disappointing earnings from Google parent Alphabet and electric vehicle maker Tesla. A disappointing start of the megacap earnings season fueled concern over the recent bull rally that was fuelled by the artificial-intelligence frenzy. The S&P 500 and Nasdaq ended at multi-week lows, with the S&P snapping one of its longest streaks without a daily decline of more than 2%. The Nasdaq Composite also posted its largest single-day percentage decline since October 2022 to finish at its lowest point since June 10. The Dow Jones Industrial Average closed below 40,000 points for the first time in two weeks. On Wednesday, the Dow Jones Industrial Average declined 504.22 points, or 1.25%, to 39,853.87, while the S&P 500 dropped 128.61 points, or 2.31%, to 5,427.13. The Nasdaq ended 654.94 points, or 3.64%, lower at 17,342.41. Tesla shares slumped 12.3% in its worst single-day fall since September 2020, after the EV maker missed profit estimates and the delay in Robotaxi. Alphabet share price dropped 5%, its worst finish since May 31, after the company flagged high capital expenses for the year and slowdown in advertising-growth. Among other stocks, Super Micro Computer Inc. tanked 9.15%, Nvidia shares declined 6.8%, and Broadcom share price plunged 7.6%. Meta Platforms stock price dropped 5.6%, Microsoft Corp. shares slid 3.6%, and Apple stock dipped 2.9% The selloff sent a Bloomberg index of the so-called Magnificent Seven technology stocks down 5.9%, falling below its average price for the past 50 days for the first time since May. The index is up 33% since the start of the Meanwhile, Microsoft Corp. is scheduled to report its financial results on July 30, followed by Meta Platforms Inc., Apple Inc. and Amazon.com Inc. later in the week. Nvidia, the biggest beneficiary of AI spending, will be the last to report on August 28, Bloomberg reported.

Tesla and Alphabet earnings disappoint, triggering sharpest market decline in 2 years

A wipeout on Wall Street sent U.S. stock indexes to their worst day since 2022 as Big Tech dragged the market lower following profit reports from Tesla and Alphabet. The S&P 500 slumped 2.3% Wednesday, its fifth drop in the last six days. The Nasdaq composite skidded 3.6%, and the Dow Jones Industrial Average fell 1.2%. Tesla tumbled after the electric vehicle maker said its profit for the spring sank 45%. Alphabet dropped despite delivering better-than-expected profit and revenue. Critics have been warning that Big Tech stocks have gotten too expensive after soaring most of this year. The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50% in the 12 months through Tuesday, on expectations for continual growth. Profit expectations are high all along Wall Street, but particularly so for the small group of stocks known as the " Magnificent Seven." Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla need to keep delivering powerful growth after being responsible for the majority of the S&P 500's run to records this year, when many other stocks struggled under the weight of high interest rates. The hope on Wall Street is that if momentum does flag for the Magnificent Seven, more stocks outside them can rise to support the market. Conditions may be improving at the right time. Hopes for imminent cuts to interest rates have helped smaller stocks in particular to flip the market's leaderboard and jump in recent weeks. The Russell 2000 index of smaller stocks has leaped at least 1% in seven of the last 10 days, though it dropped 1.5% Wednesday. They had been jumping as Treasury yields have eased on expectations that inflation is slowing enough for the Federal Reserve to begin lowering its main interest rate in September. Treasury yields were mixed Wednesday after preliminary data suggested U.S. business activity is back to shrinking in manufacturing, though continuing to grow in services industries. The overall data suggest a "Goldilocks" scenario, where the economy is not so hot that it puts upward pressure on inflation but not so cold that it veers into a recession, according to Chris Williamson, chief business economist at S&P Global Market Intelligence. But he said some potentially concerning signals were also lying beneath the surface, including heightened uncertainty around November's elections. A separate report said sales of new U.S. homes unexpectedly weakened, when economists were forecasting an acceleration. The yield on the 10-year Treasury rose to 4.27% from 4.25% late Tuesday. It was easing earlier in the morning ,and it's still down from its 4.70% in April. That's a sharp move for the bond market, which has given support to stock prices. AT&T was a bright spot for the stock market, rising 5.1% after its profit for the latest quarter matched analysts' expectations. Mattel jumped 9.7% after topping expectations for profit, aided by growth for its Fisher-Price and Hot Wheels lines. The problem for Wall Street is that even if more stocks were to rise, they'll need to do so by more than Big Tech stocks are falling because of how much influence that small group carries. Nvidia, for example, fell 6.5%. That wasn't as steep as Tesla's drop, but it was still the single heaviest weight on the S&P 500. That's because Nvidia's total market value has topped $3 trillion amid a rush into artificial-intelligence technology, and a 1% move for it packs more punch on the index than a 1% move for any company other than Microsoft or Apple. Critics have been saying Nvidia and other winners of the AI boom look expensive after soaring too high in the frenzy. Outside of Big Tech, Visa fell 3.3% after its revenue for the latest quarter came up just short of analysts' expectations. Lamb Weston lost 27.2% for the worst loss in the S&P 500 after the supplier of French fries and other frozen potato products reported weaker profit for the latest quarter than expected. The company said fewer patrons visited restaurants during the spring than it expected. It also warned challenges could continue into its upcoming fiscal year because of softer demand due to "menu price inflation." In stock markets abroad, indexes slumped across Europe and Asia. France's CAC 40 index fell 1.1% as shares of luxury giant LVMH dropped 4.7% in Paris after the owner of Louis Vuitton and Dior reported quarterly sales that missed expectations.

S&P and Nasdaq plunge sharply as Big Tech weighs

STORY: The S&P 500 and Nasdaq suffered their biggest single-day losses in nearly two years on Wednesday, dragged down by the same Big Tech names that had powered this year's rally. The Dow shed one-and-a-quarter percent, the S&P 500 tumbled 2.3% and the tech-heavy Nasdaq nosedived more than 3.6%. As the first of the Magnificent Seven stocks reported their latest quarterly numbers, investors looked to see whether their lofty valuations were justified. Despite reporting a second-quarter earnings beat, Alphabet lost more than $100 billion in market value on Wednesday, its shares shedding 5% as investors focused on a slowdown in advertising growth and larger-than-expected AI-related expenses. And Tesla reported its lowest profit margin in more than five years and missed second-quarter earnings estimates, sending its shares down more than 12%. But Will McGough, investment strategist at Prime Capital Financial, sees the drop in both stocks as buying opportunities, even as lagging electric-vehicle sales threaten to muddy Tesla's future. "Tesla is a very confusing stock in my opinion. They're confusing the Street with what they actually are. Are they an electric vehicle company, or are they going to be with battery storage? Is it going to be robotics? Is it going to be AI? Or could it be sum of all the above? And I think that sum of all the above is why Tesla is actually an interesting opportunity going forward as one of the Mag Seven." The other megacaps - Apple, Microsoft, Amazon and Meta Platforms all closed lower, with AI darling Nvidia shedding the most, down 6.8%. Visa was among the stocks that weighed on the Dow. Shares fell 4% after the credit card giant's third-quarter revenue growth fell short of expectations. As stocks tumbled, the VIX volatility index - known as Wall Street's fear gauge - closed at its highest level since April 19. But there were some bright spots, including AT&T, which gained more than 5% after beating forecasts for wireless subscriber additions.

Wall Street suffers worst day since 2022 as Tesla and Google earnings disappoint

Tech-focused Nasdaq retreats 3.6% and S&P 500 also down in wake of lacklustre results from big-tech companies Wall Street suffered its worst day of trading in 19 months as disappointment around earnings from Tesla and Google challenged the recent big-tech rally. The benchmark S&P 500 index dropped 2.3% as a sell-off triggered its biggest single-day fall since December 2022. The technology-focused Nasdaq retreated 3.6%, its largest single-day decline since October 2022. Shares in Tesla sank 12% after it reported a 45% slump in quarterly profits amid discounting by electric carmakers. Alphabet, the owner of Google and YouTube, also fell 5% as investors scrutinized a slowdown in advertising growth. The two companies were the first out of the gate as America's tech giants update shareholders on their recent performance. Over the coming weeks, the rest of the so-called "Magnificent Seven" tech heavyweights - Meta, owner of Facebook, Instagram and WhatsApp; Apple; Nvidia; Microsoft; and Amazon - are set to follow. "I can't help thinking [that] if the tech sector does sneeze, the whole market could catch it," said David Morrison, senior market analyst at Trade Nation. Danni Hewson, head of financial analysis at AJ Bell, said: "Whilst Alphabet's news wasn't awful, the fact they're still ploughing billions into [artificial intelligence] has caused some to begin questioning when enough will be enough, or at least when the expenditure will deliver the kind of results investors have been salivating over elsewhere in the AI space. "Elon Musk's attempts to get investors to look anywhere but at the bottom line has also backfired. Even if Tesla's CEO insists the company isn't just a carmaker, until robots or robo-taxis start to make money, EVs are the only game in Tesla town, and margins have been wrung out."

S&P 500 suffers biggest drop since 2022 as tech stocks crater

Earnings reports from Google's parent company, Alphabet, and Tesla on Tuesday led to a slump in big tech stocks and the biggest daily decline for Wall Street's major benchmarks in over a year. The S&P 500 fell 2.3% on Wednesday, while the technology-heavy Nasdaq tumbled 3.6%, the biggest drop for both since 2022. Investors were expecting perfection from the tech giants' earnings reports, said Daniel Ives, a tech analyst at Wedbush Securities. The sell-off indicates that investors are disappointed by the reports, but their response amounts to nothing more than "a blip in the radar," as tech companies are poised to be bolstered by the artificial intelligence boom, Ives added. "Investors are negatively reacting to any whiff of softness that we see from these big tech players," he said. "I think it's an overreaction after a massive run in tech stocks." Here's what to know about the trading. -- Tesla fell more than 12% on Wednesday, after the company Tuesday reported a 45% drop in profit in the quarter ending in June, a result of the electric car company's sluggish sales. Tesla's current operating profit margin, a measure of how much money it makes on every dollar of revenue, was 6.3%, down from 9.6% in the same period a year ago. Investors are waiting to see if Tesla, with Elon Musk at the helm, can find new ways to generate revenue. -- Even though Alphabet reported Tuesday that it beat earnings and revenue expectations, shares of the company fell more than 5% on Wednesday. Advertising sales at YouTube, which is owned by Google, climbed 13% to $8.7 billion, missing the $8.9 billion figure expected by analysts. Investors are likely to be concerned about whether Alphabet can widen its margins in the coming months. -- Shares of other big tech companies also fell. Nvidia shares dropped 6.8%, while Meta's stock was down 5.6%. "The scale of market move today demonstrates what investors have been talking about for quarters: that increasing market concentration in a handful of companies creates a risk in itself for holders of the major equity indices," Lauren Goodwin, an economist at New York Life Investments, said in an emailed statement. -- There has also been a broader shift among investors away from tech and toward smaller stocks, as macroeconomic dynamics appear increasingly favorable to smaller companies' shares. Consumer price index data released this month showed a further cooldown in inflation, solidifying investors' expectations that the Federal Reserve will start to cut interest rates in September. The potential for lower interest rates could catalyze a shift to investment in small and medium-sized companies, Ido Caspi, a research analyst at Global X, said in a statement.

Stock market today: Nasdaq suffers worst day since 2022 as weak earnings spark steep sell-off | Business Insider India

US stocks dropped on Wednesday, led by a steep sell-off in the tech sector after the first batch of mega-cap earnings disappointed investors. The major indexes all ended the day lower, with the Nasdaq Composite falling more than 3% to notch its worst trading day in since 2022. The S&P 500 dropped more than 2% and the Dow Jones Industrial Average lost more than 500 points. Investors were shaken after Tesla and Alphabet reported financials for the second quarter. Tesla shares dropped 12% after the carmaker missed earnings estimates and logged a big drop in auto revenue. Alphabet shares, meanwhile, fell 5% after the Google parent beat on earnings but reported weaker ad revenue from YouTube and rising capital expenditures during the quarter. Other mega-cap tech stocks also tumbled in Wednesday's session as investor sentiment soured. Nvidia shares fell almost 7%, while Meta shares ended the trading session 5.6% lower. "So is the Tech-led bull market over? Is the AI bubble bursting? Or are investors rotating out of Tech into all the laggards? Or is the bull market simply broadening?" Yardeni Research wrote in a note. "For now, we believe that the stock market was overbought and is experiencing a minor selloff." Investors are waiting on more mega-cap tech earnings, with Meta, Apple, and Amazon set to report their financials next week. In the meantime, traders are eyeing fresh economic data releases. Second-quarter GDP estimates are due on Thursday, and the personal consumption expenditures price index, the Fed's preferred measure of inflation, is due on Friday. Markets are expecting PCE inflation to slow to 2.5% on an annual basis, while GDP is expected to show the economy grew 2.1% last quarter. The readings will help inform rate-cut bets as the central bank heads into its two-day policy meeting next week. Here's where US indexes stood at the 4:00 p.m. closing bell on Monday:

Megacap stock selloff shows investor concerns about too much tech

July 25 (Reuters) - A tumble in the heavyweight stocks that have powered markets higher this year is highlighting Wall Street's vulnerability to any weakness in the Big Tech trade and causing concerns that over-stretched stocks are in for more turbulence. Disappointing quarterly reports from Tesla and Google-parent Alphabet sparked a crushing market selloff on Wednesday, with the tech-heavy Nasdaq Composite falling 3.6% in its worst day since October 2022. The benchmark S&P 500 slumped 2.3%, with the earnings reports causing concerns about upcoming results from the other big tech firms. "This was the hair trigger for people saying, 'Wow, I've got way too much exposure to information technology and growthier type companies,'" said Thomas Martin, senior portfolio manager at GLOBALT, about Tesla's results, after the electric vehicle automaker posted its lowest quarterly profit margin in five years. "The trade ... is to get more diversified." The rout comes after optimism about artificial intelligence technology fueled a months-long rally in a handful of massive technology and growth companies including chipmaker Nvidia , Microsoft and Amazon, pushing the S&P 500 to record highs this year. The megacap stocks - dubbed, with Meta Platforms and Apple, the Magnificent Seven - have accounted for around a third of the S&P 500's 14% gain in 2024, making their trajectories a key factor in how broader markets will perform. As share prices soared, concerns grew over companies' stretched valuations and comparisons to the dotcom bubble of more than two decades ago became more frequent. The S&P 500 is trading near 22 times expected earnings, its highest in over two years, and well above its 10-year average of 18, according to LSEG data. Signs of nervousness around tech stocks began to creep up in recent weeks, as the blistering rally in many of the market leaders seemed to run out of gas. One signal came from the rise in the Cboe Volatility Index, known as Wall Street's fear gauge because it measures demand for portfolio protection. The measure shot to its highest level in three months on Wednesday. Hedge funds have been reducing their exposure to markets for the last two weeks, prime brokers at both Goldman Sachs and Morgan Stanley said in notes last week, amid fears that gains from earlier this year could evaporate if sentiment around tech stocks changed. Andrew Volz, chief operating officer at prime broker Clear Street, said hedge funds continued to deleverage their portfolios on Wednesday, selling long positions and covering bearish bets. "There were definitely general liquidations of things like Nvidia, Tesla, all the big seven tech companies," said Volz. Though the S&P 500 is still just 4% below an all-time high hit earlier this month, some investors worry that Wall Street may have become too optimistic about earnings growth, leaving stocks vulnerable if companies are unable to meet expectations in coming months. One example could be seen on Wednesday, when Alphabet's shares fell more then 5%. While the company reported better-than-expected revenues, investors grew wary that rising investments in AI infrastructure would squeeze margins and YouTube was facing tough competition for ad dollars. "We set the bar too high on earnings," said Jake Dollarhide, chief executive officer of Longbow Asset Management. "Even Alphabet's earnings beat, but the market obviously wasn't impressed and they didn't beat by enough." Many other Magnificent Seven stocks saw sharp declines on Wednesday. Tesla shares fell more than 12% in their worst daily drop since 2020, while Nvidia's lost 6.8%. Microsoft shares fell 3.6% and Apple lost 2.9%. Wednesday's selloff is likely to leave investors on tenterhooks in coming weeks, as more tech earnings come in. Meta, Microsoft and Apple are all scheduled to report next week, potentially ramping up volatility if any one of them disappoints or assuaging investor fears if the results are strong. "We're in a little bit of a pullback. But to me, it's really just a short-term thing," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "If we see some good numbers in the coming days, it could reverse just as quickly." (Reporting by Noel Randewich, Stephen Culp, Carolina Mandl and Alden Bentley; Writing by Ira Iosebashvili; Editing by Megan Davies and Christopher Cushing)

Wipeout on Wall Street sends S&P 500 down by 2.3% as Big Tech skids

Traders work on the floor at the New York Stock Exchange (NYSE) in N.Y., June 12. Reuters-Yonhap A wipeout on Wednesday sent U.S. stock indexes to their worst losses since 2022 after profit reports from Tesla and Alphabet helped suck momentum from Wall Street's frenzy around artificial-intelligence technology. The S&P 500 tumbled 2.3 percent for its fifth drop in the last six days. The Dow Jones Industrial Average dropped 504 points, or 1.2 percent, and the Nasdaq composite skidded 3.6 percent. The profit reports from Tesla and Alphabet weren't disasters, but they raised questions among investors about which other market heavyweights' springtime results could fall short of expectations, said Sam Stovall, chief investment strategist at CFRA. "How many disappointments are we likely to see? Maybe let's sell first and ask questions later." Tesla was one of the heaviest weights on the market and tumbled 12.3 percent after reporting a 45 percent drop in profit for the spring, and its earnings fell short of analysts' forecasts. Tesla has become one of Wall Street's most valuable companies not just because of its electric vehicles but also because of its AI initiatives, such as a robotaxi. That's a tough business to assign a value to, according to UBS analysts led by Joseph Spak, and the "challenge is that the time frame, and probability of success is not clear." At Alphabet, meanwhile, investors' patience with the company's big AI investments may also be running thinner. Alphabet dropped 5 percent even though it delivered better profit and revenue for the latest quarter than expected. Analysts pointed to some pockets of weakness underneath the surface, including weaker growth in advertising revenue for YouTube than expected. They also said increased AI investments and other spending could crimp how much cash it generates. The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50 percent in the 12 months through Tuesday, on expectations for continual growth. Profit expectations are high for U.S. companies broadly, but particularly so for the small group of stocks known as the "Magnificent Seven." Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla need to keep delivering powerful growth after being responsible for the majority of the S&P 500's run to records this year, when many other stocks struggled under the weight of high interest rates. Critics are also calling these superstar stocks too expensive following their rocket rides higher. The hope on Wall Street is that if momentum does flag for the Magnificent Seven, more stocks outside them can rise to support the market. Conditions may be improving at the right time. Hopes for imminent cuts to interest rates have helped smaller stocks in particular to flip the market's leaderboard and jump in recent weeks. The Russell 2000 index of smaller stocks had leaped at least 1 percent in seven of the last 10 days, though its momentum also slammed into a wall. It dropped 2.1 percent Wednesday. Smaller stocks had been jumping as Treasury yields eased on expectations that inflation is slowing enough for the Federal Reserve to begin lowering its main interest rate in September. Treasury yields were mixed Wednesday after preliminary data suggested U.S. business activity is back to shrinking in manufacturing, though continuing to grow in services industries. This undated file photo shows a logo of NVIDIA at its corporate headquarters in Santa Clara, Calif. Reuters-Yonhap The overall data suggested a "Goldilocks" scenario, where the economy is not so hot that it puts upward pressure on inflation but not so cold that it veers into a recession. But Chris Williamson, chief business economist at S&P Global Market Intelligence, said some potentially concerning signals were also lying beneath the surface, including heightened uncertainty around November's elections. The yield on the 10-year Treasury rose to 4.28 percent from 4.25 percent late Tuesday. AT&T was a bright spot for the stock market, rising 5.2 percent after its profit for the latest quarter matched analysts' expectations. Mattel jumped 9.8 percent after topping expectations for profit, aided by growth for its Fisher-Price and Hot Wheels lines. The problem for Wall Street is that even if more stocks were to rise, they'll need to do so by more than Big Tech stocks are falling because of how much influence that small group carries. Nvidia, for example, fell 6.8 percent. That wasn't as steep as Tesla's drop, but it was still the single heaviest weight on the S&P 500 because its total market value tops Tesla's. A 1 percent move for Nvidia packs more punch on the index than a 1 percent move for any company other than Microsoft or Apple. Outside of Big Tech, Lamb Weston lost 28.2 percent for the worst loss in the S&P 500 after the supplier of French fries and other frozen potato products reported weaker profit for the latest quarter than expected. The company said fewer diners visited restaurants during the spring than it expected. It also warned challenges could continue into its upcoming fiscal year because of softer demand due to "menu price inflation." All told, the S&P 500 fell 128.61 points to 5,427.13. The Dow dropped 504.22 to 39,853.87, and the Nasdaq slid 654.94 to 17,342.41. In stock markets abroad, indexes slumped across Europe and Asia. France's CAC 40 index fell 1.1 percent as shares of luxury giant LVMH dropped 4.7 percent in Paris after the owner of Louis Vuitton and Dior reported quarterly sales that missed expectations. (AP)