Wall Street rout: $1T erased in worst day since 2022
Wall Street experienced its worst trading day in 19 months on Wednesday, with significant drops in major indexes. The S&P 500 index fell by 2.3%, marking its largest single-day decline since December 2022. Technology-centric Nasdaq plummeted by a substantial 3.6%, its biggest fall since October 2022. The Dow Jones Industrial Average was not spared either, falling 1.2%. Nasdaq 100, having a much narrower scope than Nasdaq, recorded a loss of over $1 trillion in market value.
Tesla and Google earnings trigger market downturn
The market downturn was primarily triggered by disappointing earnings from Tesla and Google. Tesla's shares plummeted by 12% following a reported 45% slump in quarterly profits due to discounting by electric carmakers. Alphabet, the parent company of Google, also experienced a 5% fall in its shares as investors scrutinized a slowdown in advertising growth. Despite Alphabet's better-than-expected profit and revenue for the latest quarter, analysts pointed to weaker growth in YouTube's advertising revenue and increased AI investments as potential concerns.
Analysts weigh in on tech sector's impact on market health
Senior market analyst at Trade Nation, David Morrison, expressed concern over the tech sector's influence on the overall market, stating, "I can't help thinking [that] if the tech sector does sneeze, the whole market could catch it." Danni Hewson, head of financial analysis at AJ Bell, echoed this sentiment by highlighting Alphabet's continued investment in AI as a potential worry for investors. Hewson suggested that some investors are questioning when these AI expenditures will yield desired results.
Tech giants' earnings reports spark concerns among investors
The disappointing earnings reports from Tesla and Alphabet have sparked concerns among investors about other market heavyweights' springtime results potentially falling short of expectations. UBS's Joseph Spak noted that assigning a value to businesses like Tesla's AI initiatives, such as a robotaxi, is challenging due to unclear time frames and probabilities of success. Chief investment strategist at CFRA, Sam Stovall, reflected this sentiment stating, "How many disappointments are we likely to see? Maybe let's sell first and ask questions later."
Tech giants' losses lead to record market value wipeout
The disappointing earnings reports from Tesla and Alphabet also led to a record loss in market value for the Magnificent Seven group of tech giants, which includes Meta, Apple, NVIDIA, Microsoft, and Amazon. The stocks collectively lost $768 billion in market value, marking the biggest such wipeout on record since Meta Platforms went public as Facebook in 2012. As tech stocks have been battered in recent weeks, investors have increasingly shifted money toward small and midsize firms.
