Asian stocks plunge after Wall Street meltdown as big tech skids

TOKYO (AP) — Asian stocks fell Thursday morning, with Tokyo's benchmark index shedding more than 1,000 points at one point and closing down more than 3%, as pessimism set in during a freefall on Wall Street.

U.S. stock indexes suffered their worst losses since 2022 after earnings reports You're here And Alphabet helped slow Wall Street's momentum frenzy around artificial intelligence technology.

In Asia, Japan's Nikkei 225 index lost 3.3 percent to 37,869.51 points. Australia's S&P/ASX 200 index fell 1.2 percent to 7,870.40 points. South Korea's Kospi fell 1.8 percent to 2,707.97 points. Hong Kong's Hang Seng fell 1.9 percent to 16,985.94 points, while the Shanghai Composite dropped 0.6 percent to 2,883.59 points.

Among the region's technology stocks, Samsung Electronics fell 1.8%, while Nintendo lost 2.6%. Tokyo Electron fell nearly 5%.

Earnings expectations are high for U.S. companies in general, but particularly for the small group of stocks known as The Magnificent SevenAlphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla should continue to generate strong growth after being responsible for much of the S&P 500's record highs this year.

Negative sentiment was exacerbated by disappointing results from Google and Tesla, ahead of more key reports from the Magnificent Seven in the coming weeks. The tech sector could come under significant pressure in Asia today, said Anderson Alves of ActivTrades.

The recent strengthening of the yen, which has recovered from above 160 yen to the dollar earlier this month, is also a negative for some Japanese companies, which are dominated by exporters.

Shares of Toyota Motor Corp. fell 2% in morning trading, while Sony Group fell 4%.

In the foreign exchange market, the U.S. dollar fell to 152.78 yen from 153.89. The euro was worth $1.0841, little changed from $1.0841.

On Wall Street, the S&P 500 fell 2.3%, its fifth decline in six days, closing at 5,427.13 points. The Dow Jones Industrial Average fell 1.2% to 39,853.87 points, and the Nasdaq Composite slid 3.6% to 17,342.41 points.

Tesla and Alphabet's earnings reports weren't disasters, but they raised questions among investors that other market heavyweights' spring results could fall short of expectations, said Sam Stovall, chief investment strategist at CFRA.

“How many disappointments are we likely to see? Maybe we should sell first and ask questions later.

Tesla was one of the market's heavyweights, falling 12.3% after reporting a 45% drop in profits in the spring, and its earnings fell short of analysts' forecasts.

The story continues

Tesla has become one of the most valuable companies on Wall Street, not only because of its electric vehicles but also because of its artificial intelligence initiatives, such as the robotaxi. Putting a value on the company is difficult, according to UBS analysts led by Joseph Spak, and the challenge is that the time frame and probability of success are unclear.

At Alphabet, investors' patience for the company's big investments in AI may also be wearing thin.

Alphabet Inc. fell 5%, even though its latest quarterly profit and revenue came in better than expected. Analysts pointed to some weak spots, 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.

The Russell 2000 index of small caps had jumped at least 1% in seven of the past 10 days, but fell 2.1% on Wednesday.

Small stocks 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 were mixed on Wednesday after preliminary data suggested U.S. business activity was down again in the manufacturing sector, although it continued to grow in services sectors.

The headline data suggests a best-case scenario, in which the economy is not in such good shape that it puts upward pressure on inflation but also not in such good shape that it slips into a recession. But Chris Williamson, chief economist at S&P Global Market Intelligence, said there are also some potentially worrying signals lurking beneath the surface, including heightened uncertainty around the November election.

The 10-year Treasury yield rose to 4.28% from 4.25% late Tuesday.

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 group's enormous influence.

Nvidiafor example, fell 6.8%. That’s not as sharp as Tesla’s drop, but it’s still the heaviest weight on the S&P 500 because its total market value exceeds Tesla’s. A 1% gain for Nvidia has a bigger impact on the index than a 1% gain for any company other than Microsoft or Apple.

In the energy sector, the barrel of American crude oil, an international benchmark, lost 57 cents to $77.02. The barrel of Brent, an international benchmark, lost 57 cents to $80.25.