Stock market today: Big tech companies slump after Alphabet and Tesla earnings fail to impress

NEW YORK — Big Tech declines drag U.S. stock indexes lower Wednesday after You're here And Alphabet They released earnings reports that caused a stir on Wall Street.

THE&The P 500 index was down 1.6% in midday trading and on track for its fifth loss in six days. The Dow Jones Industrial Average was down 372 points, or 0.9%, at 11:30 a.m. ET, and the Nasdaq Composite was down 2.5%.

Tesla was one of the market heavyweights after falling 11.4%. 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 4.3%, 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, 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 the majority of S sales&The P 500 indexes have hit record highs this year, while many other stocks have struggled under the weight of high interest rates.

The hope on Wall Street is that if the Magnificent Seven’s momentum falters, other stocks outside of those countries can rise to support the market. Conditions could improve at the right time. Hopes of an imminent interest rate cut have helped small stocks in particular to buck the market leaderboard and 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 slipped 0.4% on Wednesday.

They jumped as Treasury yields fell on expectations that inflation slows sufficiently for the Federal Reserve to begin lowering its main interest rate in September.

Treasury yields fell again Wednesday after preliminary data suggested that U.S. economic activity is again declining in manufacturing, though it continues to grow in services sectors. The overall data suggests a Goldilocks scenario, where the economy is not so hot that it puts upward pressure on inflation, but not so cold that it is headed for a recession, according to Chris Williamson, chief economist at S&P Global Market Intelligence.

But he added that there were also some potentially worrying signals lurking beneath the surface, including heightened uncertainty around the November election.

A separate report said U.S. new home sales unexpectedly weakened, while economists had expected an acceleration.

The yield on the 10-year Treasury note fell to 4.21% late Tuesday, from 4.25% late Tuesday and 4.70% in April. That's a big gain for the bond market, which has supported stock prices.

HAS&The T was a bright spot for the stock market, rising 4.4% after its latest quarterly profit met analysts' expectations. Mattel jumped 10.3% after beating profit expectations, helped by growth in its Fisher-Price and Hot Wheels lines.

The problem for Wall Street is that even if more stocks were to rise, it would have to be more than the decline in big tech stocks, because of the considerable influence of this small group.

Nvidiafor example, fell 3.7%. It wasn't as steep as Tesla's drop, but it was still the heaviest weight on the S&P 500. That's because Nvidia's total market value has surpassed $3 trillion amid a rush to artificial intelligence technologyand a 1% change in its stock has more impact on the index than a 1% change in any company other than Microsoft or Apple.

Outside of Big Tech, Visa fell 4% after its revenue for the latest quarter fell slightly short of analysts' expectations.

Lamb Weston fell 26.9%, worst loss of the year&P 500 after the supplier of French fries and other frozen potato products reported weaker-than-expected profit for the latest quarter. The company said fewer customers visited restaurants in the spring than expected. It also warned that the challenges could continue into its next 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 1.1% as shares in luxury giant LVMH fell 4.6% 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.