On Wednesday, U.S. stock indexes experienced their worst losses since 2022, triggered by quarterly profit reports from Tesla and Alphabet. These reports dampened Wall Street’s enthusiasm for artificial intelligence technology, leading to significant declines across major indexes.
Major Index Drops
Nasdaq Composite: The Nasdaq Composite recorded its largest single-day percentage drop since October 2022, closing at its lowest level since June 10. The index fell by 654.94 points, or 3.64%, to 17,342.41.
Dow Jones Industrial Average: The Dow Jones Industrial Average dropped by 504.22 points, or 1.25%, closing at 39,853.87. This marked the first time in two weeks that it closed below 40,000 points.
S&P 500: The S&P 500 declined by 128.61 points, or 2.31%, ending at 5,427.13. This was the fifth drop for the index in the last six days.
Global Market Sentiment
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented, “Global cues have turned distinctly negative with a sharp 3.64% cut in Nasdaq, which is the worst cut in 2024. The tech stocks which have been driving the rally in the US are facing the brunt of selling due to worse-than-expected results and news.”
Investor Concerns
The profit reports from Tesla and Alphabet, while not disastrous, raised concerns among investors. Sam Stovall, Chief Investment Strategist at CFRA, noted, “How many disappointments are we likely to see? Maybe let’s sell first and ask questions later.”
Tesla’s Impact
Tesla’s stock dropped by 12.3% after reporting a 45% decline in profit for the spring, missing analysts’ forecasts. Tesla, a company highly valued for its electric vehicles and AI initiatives like the robotaxi, faces challenges in assigning a clear value to these ventures. UBS analysts, led by Joseph Spak, mentioned, “The challenge is that the time frame and probability of success is not clear.”
Alphabet’s Struggles
Alphabet’s stock fell by 5% despite reporting better-than-expected profit and revenue for the latest quarter. Analysts highlighted weaknesses, such as slower growth in YouTube’s advertising revenue and increased AI investments that could limit cash generation. Alphabet’s stock had already rallied nearly 50% in the 12 months leading up to Tuesday, driven by expectations of continuous growth, which may have contributed to investor impatience.
The substantial drops in Tesla and Alphabet stocks highlight investor concerns about future earnings of market heavyweights. The broader impact on major U.S. indexes reflects a shift in market sentiment, driven by uncertainties in tech sector profitability and the sustainability of AI-driven growth. This day of significant losses underscores the market’s vulnerability to high expectations and the critical role of quarterly earnings in shaping investor confidence.
(With inputs from agencies)
