FILE - The New York Stock Exchange is shown on June 18, 2024 in New York. (AP Photo/Peter Morgan, File)
NEW YORK (AP) – A wipeout on Wall Street sent U.S. stock indexes to their worst day since 2022 as Big Tech dragged the market lower following profit reports from Tesla and Alphabet. The S&P 500 slumped 2.3% Wednesday, its fifth drop in the last six days. The Nasdaq composite skidded 3.6%, and the Dow Jones Industrial Average fell 1.2%. Tesla tumbled after the electric vehicle maker said its profit for the spring sank 45%. Alphabet dropped despite delivering better-than-expected profit and revenue. Critics have been warning that Big Tech stocks have gotten too expensive after soaring most of this year.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) – A wipeout on Wall Street Wednesday has U.S. stock indexes heading for their worst losses since 2022, as Big Tech drags the market lower following profit reports from Tesla and Alphabet that weren’t impressive enough.
The S&P 500 slumped 2% and was on track for its fifth drop in the last six days. The Dow Jones Industrial Average was down 399 points, or 1%, as of 2:45 p.m. Eastern time, and the Nasdaq composite was 3.3% lower.
Tesla was one of the heaviest weights on the market after tumbling 10.8%. The electric vehicle maker said its profit for the spring weakened by 45% from a year earlier, and its earnings fell short of analysts’ forecasts.
Alphabet dropped 5.2% even though it delivered better profit and revenue for the latest quarter than expected. Analysts pointed to some pockets of weakness underneath the surface, including weaker growth in advertising revenue for YouTube than expected.
The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50% in the 12 months through Tuesday, on expectations for continual growth.
Profit expectations are high all along Wall Street, but particularly so for the small group of stocks known as the ” Magnificent Seven.” Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla need to keep delivering powerful growth after being responsible for the majority of the S&P 500’s run to records this year, when many other stocks struggled under the weight of high interest rates.
The hope on Wall Street is that if momentum does flag for the Magnificent Seven, more stocks outside them can rise to support the market. Conditions may be improving at the right time. Hopes for imminent cuts to interest rates have helped smaller stocks in particular to flip the market’s leaderboard and jump in recent weeks.
The Russell 2000 index of smaller stocks has leaped at least 1% in seven of the last 10 days, though it dropped 1.5% Wednesday.
They had been jumping as Treasury yields have eased on expectations that inflation is slowing enough for the Federal Reserve to begin lowering its main interest rate in September.
Treasury yields were mixed Wednesday after preliminary data suggested U.S. business activity is back to shrinking in manufacturing, though continuing to grow in services industries. The overall data suggest a “Goldilocks” scenario, where the economy is not so hot that it puts upward pressure on inflation but not so cold that it veers into a recession, according to Chris Williamson, chief business economist at S&P Global Market Intelligence.
But he said some potentially concerning signals were also lying beneath the surface, including heightened uncertainty around November’s elections.
A separate report said sales of new U.S. homes unexpectedly weakened, when economists were forecasting an acceleration.
The yield on the 10-year Treasury rose to 4.27% from 4.25% late Tuesday. It was easing earlier in the morning ,and it’s still down from its 4.70% in April. That’s a sharp move for the bond market, which has given support to stock prices.
AT&T was a bright spot for the stock market, rising 5.1% after its profit for the latest quarter matched analysts’ expectations. Mattel jumped 9.7% after topping expectations for profit, aided by growth for its Fisher-Price and Hot Wheels lines.
The problem for Wall Street is that even if more stocks were to rise, they’ll need to do so by more than Big Tech stocks are falling because of how much influence that small group carries.
Nvidia, for example, fell 6.5%. That wasn’t as steep as Tesla’s drop, but it was still the single heaviest weight on the S&P 500. That’s because Nvidia’s total market value has topped $3 trillion amid a rush into artificial-intelligence technology, and a 1% move for it packs more punch on the index than a 1% move for any company other than Microsoft or Apple.
Critics have been saying Nvidia and other winners of the AI boom look expensive after soaring too high in the frenzy.
Outside of Big Tech, Visa fell 3.3% after its revenue for the latest quarter came up just short of analysts’ expectations.
Lamb Weston lost 27.2% for the worst loss in the S&P 500 after the supplier of French fries and other frozen potato products reported weaker profit for the latest quarter than expected. The company said fewer patrons visited restaurants during the spring than it expected. It also warned challenges could continue into its upcoming fiscal year because of softer demand due to “menu price inflation.”
In stock markets abroad, indexes slumped across Europe and Asia.
France’s CAC 40 index fell 1.1% as shares of luxury giant LVMH dropped 4.7% in Paris after the owner of Louis Vuitton and Dior reported quarterly sales that missed expectations.
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AP Business Writer Matt Ott contributed.
