Traders work on the floor of the New York Stock Exchange (NYSE) in New York City on July 22, 2024.
Timothy A. Clary | AFP | Getty Images
Stocks fell Wednesday as investors were underwhelmed by quarterly reports from megacap tech companies Alphabet and Tesla.
The Nasdaq Composite dropped 2.3%, while the S&P 500 slid 1.5%. The Dow Jones Industrial Average shed 341 points, or 0.9%.
Shares of Google parent company Alphabet fell nearly 4%. Although Alphabet reported a top and bottom line beat, YouTube advertising revenue fell below the consensus estimate. Meanwhile, Tesla shares declined 12% on weaker-than-expected results and a 7% year-over-year drop in auto revenue.
Other megacap tech stocks fell in sympathy with Alphabet and Tesla. Nvidia and Meta Platforms lost 3% each, while Microsoft slid 2%.
Those reports mark investors’ first look at how megacap companies fared during the second quarter. Reports from these names are of special interest to Wall Street as this small cohort is responsible for the bulk of this year’s gains.
“One of the fastest ways for a rotation to occur under the surface would be earnings misses for the magnificent seven,” wrote Strategas strategist Ryan Grabinski. “We have talked about for some time how eventually ‘AI Enthusiasm’ will turn to ‘AI Disappointment.’ The next two weeks will be pivotal.”
So far, though, the earnings season overall is off to a strong start. More than 25% of S&P 500 companies have reported their second-quarter earnings, with roughly 80% of them topping expectations, according to FactSet data.
Adding to investor concerns on Wednesday morning was weaker-than-expected U.S. manufacturing data.
The U.S. PMI flash manufacturing output index fell to 49.5 in July, unexpectedly slipping into contraction territory as new orders, production and inventories declined. Economists had forecasted a reading of 51.5, according to Dow Jones.
A Wednesday report also showed that new home sales came in lighter than economists had expected for the month of June.
