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Stock market today: Big tech companies slump after Alphabet and Tesla earnings fail to impress
NEW YORK (AP) — Declines in big technology companies dragged U.S. stock indexes lower Wednesday after earnings reports from You're here And Alphabet hit Wall Street with a thud.
The S&P 500 index was down 1.3% in morning trading, on track for its fifth decline in six days. The Dow Jones Industrial Average was down 342 points, or 0.8%, as of 10 a.m. ET, and the Nasdaq Composite was down 2%.
Tesla was one of the market's heavyweights after falling 12.5%. The electric vehicle maker said its spring profit fell 45% from a year earlier and its earnings fell short of analysts' forecasts.
Alphabet Inc. fell 3.3%, even though its latest quarterly profit and revenue came in better than expected. Analysts pointed to some underlying weaknesses, including weaker-than-expected growth in YouTube ad revenue.
The biggest challenge for Alphabet may simply have been how much its stock has already risen, nearly 50% in the 12 months through Tuesday night, on expectations of continued growth.
Earnings expectations are high on Wall Street, but particularly for the small group of stocks known as The Magnificent SevenAlphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla are expected to continue generating strong growth after being responsible for most of the S&P 500's record highs this year, while many other stocks have suffered from high interest rates.
The hope on Wall Street is that if the Magnificent Seven's momentum falters, other stocks outside those countries can rise to support the market. The situation could improve at the right time. Hopes of an imminent interest rate cut have helped small stocks surge in recent weeks.
The Russell 2000 index of small caps has jumped at least 1% in seven of the past 10 days, although it fell 0.8% on Wednesday.
Treasury yields jumped on expectations of lower inflation, which should allow the Federal Reserve to begin cutting its key interest rate in September.
Treasury yields fell again Wednesday after preliminary data suggested that U.S. economic activity was falling again in manufacturing but continued to grow in services. Similar figures from Europe were weaker than expected. Another report said new home sales unexpectedly declined, while economists had expected an acceleration.
The yield on the 10-year Treasury note edged down to 4.23%, from 4.25% late Tuesday and 4.70% in April. That's a big gain for the bond market, which has supported stock prices.
AT&T was a bright spot for the stock market, rising 3.9% after its latest quarterly profit matched analysts' expectations.
But Visa fell 3.6% after its revenue for the latest quarter fell slightly short of analysts' expectations.
Lamb Weston shares fell nearly 22%, the biggest loss in the S&P 500, after the supplier of frozen French fries and other potato products to restaurants reported weaker-than-expected profit for the latest quarter. The company said restaurant customers were even fewer than expected in the spring in the U.S. and several of its major international markets. It also warned that it sees continued challenges in its fiscal year due to weaker demand driven by menu price inflation.
On foreign stock markets, indices fell in Europe and Asia.
France's CAC 40 index fell 0.9% as shares in luxury giant LVMH fell 3.6% in Paris after the owner of Louis Vuitton and Dior reported lower-than-expected quarterly sales.
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AP Business reporter Matt Ott contributed to this report.
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