Succumbed to massive liquidations Wall Street in today’s session, under the weight of quarterly results from two leading technology companies, taking it S&P 500 in its worst daily performance since December 2022.
The index lost 2.31% of its value, closing at 5,427.13 points. The Nasdaq plunged 3.64% in its worst session in 2024, ending at 17,342.41. The Nasdaq 100 fell 4%. The Dow Jones Index fell 504.22 points or 1.25%, to 39,853.87 points.
Shares of Google parent Alphabet fell 5%, their biggest one-day drop since Jan. 31, when they fell 7.5%. While Alphabet reported better-than-expected earnings, YouTube’s ad revenue fell short of expectations. Meanwhile, Tesla shares fell 12.3% in their worst session of 2024, following worse-than-expected earnings.
Alphabet and Tesla’s path was followed by other big tech companies. Nvidia and Meta platforms lost 6.8% and 5.6% of their value at the same time, while Microsoft fell 3.6%.
Today’s selloff was caused by the “perfect storm” of an overbought market, overly high earnings expectations and a seasonally weak period for stocks. That’s why the pullback didn’t come as much of a surprise to investors, according to Baird strategist Ross Mayfield.
“The problem with tech is not that earnings are less than perfect, but that the sector has been hit by a sharp shift by investors to other sectors that have lagged until now, and this has happened after the consumer price data,” explains a Vital Knowledge analyst.
The small-cap Russell 2000 index fell 2.1%. For the month, it’s up 7.2% as investors shifted from large-cap technology names to smaller stocks. The Dow is up 1.9% so far in July, while the S&P 500 has fallen 0.6% and the Nasdaq has dropped 2.2%.
While the big tech names missed analysts’ expectations, the second-quarter earnings season overall got off to a strong start. More than 25 percent of S&P 500 companies reported second-quarter results, with 80 percent beating analysts’ estimates, according to FactSet data.
Worse-than-expected manufacturing data also added to investor concerns. The manufacturing PMI fell to 49.5 in July, showing an unexpected contraction as new orders slowed.