Technology stocks are slumping Wednesday as several of Wall Street’s most influential stocks feel the downside of ultrahigh expectations. The S&P 500 was 0.9% lower in morning trading. The drops for Big Tech sent the Nasdaq composite down a market-leading 1.6%. The Dow Jones Industrial Average, which has less of an emphasis on tech, was an outlier and up 27 points, or 0.1%.
Quick Read
- Tech Stocks Decline: Technology stocks are experiencing a downturn, with the S&P 500 down 0.9% and the Nasdaq composite leading the market drop at 1.6%.
- Dow Jones Slight Increase: The Dow Jones Industrial Average, less tech-centric, saw a minor rise of 27 points, or 0.1%.
- Alphabet’s Fall: Despite exceeding profit and revenue expectations, Alphabet’s stock fell 6.2% due to concerns over its advertising revenue trends and high market expectations.
- Big Tech Challenges: High expectations are affecting other major tech companies like Microsoft, which is down 1.3% despite a strong earnings report, and Tesla, which dropped 0.8% following a legal ruling against Elon Musk’s compensation package.
- Earnings Reports Anticipation: Amazon, Apple, and Meta Platforms, part of the “Magnificent Seven,” are set to report their quarterly results with high investor expectations.
- Advanced Micro Devices Drop: AMD’s stock fell 4.6% after its revenue forecast for the upcoming quarter didn’t meet analyst expectations, despite matching profit estimates and slightly exceeding revenue expectations.
- Bond Market Influence: Lower bond yields are providing some support to stocks, with the 10-year Treasury yield dropping to 3.95%.
- Federal Reserve’s Next Moves: The market anticipates the Fed will keep interest rates steady, with potential hints of future rate cuts.
- Economic Data: Reports indicating slower growth in worker pay and benefits, and softer hiring in January, could influence the Fed’s decisions and market sentiments.
- Global Market Reactions: Chinese stock markets continue to struggle, while other Asian and European markets show mixed results.
The Associated Press has the story:
Tech slumps as Alphabet and others feel the pain of high expectations
Newslooks- NEW YORK (AP) —
Technology stocks are slumping Wednesday as several of Wall Street’s most influential stocks feel the downside of ultrahigh expectations.
The S&P 500 was 0.9% lower in morning trading. The drops for Big Tech sent the Nasdaq composite down a market-leading 1.6%. The Dow Jones Industrial Average, which has less of an emphasis on tech, was an outlier and up 27 points, or 0.1%.
Alphabet was one of the heaviest weights on the market, and it fell 6.2% despite reporting stronger profit and revenue for the latest quarter than analysts expected. Underneath the surface, analysts pointed to some concerning trends in how much Google’s parent company is earning from advertising.
The bigger challenge, though, may have been the high expectations the company is contending with after its stock soared last year by much more than the rest of the market. Other Big Tech stocks that likewise accounted for a disproportionate amount of the S&P 500’s rally to a record were also struggling Wednesday in the face of high expectations.
Microsoft was down 1.3% even though it delivered stronger profit and revenue than expected. One analyst, Dan Ives of Wedbush Securities, even called the quarterly report “a masterpiece that should be hung in the Louvre.”
Tesla, another member of the group of stocks nicknamed the “Magnificent Seven,” sank 0.8%. A judge in Delaware ruled a day earlier that its CEO, Elon Musk, is not entitled to the landmark compensation package awarded him by Tesla that’s potentially worth more than $55 billion.
The Magnificent Seven were responsible for the majority of the S&P 500’s return last year, and three more members are scheduled to report their latest quarter results on Thursday: Amazon, Apple and Meta Platforms. Expectations are high for them, too.
Advanced Micro Devices is not a member of the Magnificent Seven, but it benefits from many of the same trends. It fell 4.6% even though it matched analysts’ expectations for profit in the latest quarter and edged past them for revenue. Its forecast for revenue in the upcoming quarter fell short of analysts’ estimates.
Elsewhere on Wall Street, stocks were getting some lift from easing yields in the bond market.
Lower yields can mean less pressure on the economy and financial system, while also encouraging investors to pay higher prices for stocks. They’ve been generally dropping since autumn on expectations that a cooldown in inflation will push the Federal Reserve to cut interest rates several times this year.
The Fed will announce its latest decision on interest rates in the afternoon, and the wide expectation is that it will leave its main interest rate steady. The hope is that it may offer hints about when it will begin cutting rates later this year.
A couple reports Wednesday morning may have encouraged Fed officials to consider an earlier start.
One report said that growth in pay and benefits for U.S. workers was slower in the final three months of 2023 than economists expected. While all workers would like bigger raises, the cooler-than-expected data could help calm one of the Fed’s big fears: that too-big pay gains would trigger a vicious cycle that ends up keeping inflation high.
A separate report from the ADP Research Institute also suggested hiring by non-government employers was softer in January than economists expected. The Fed and Wall Street are hoping that the job market cools by just the right amount, enough to keep a lid on inflation but not so much that it causes a recession
The yield on the 10-year Treasury fell to 3.95% from 4.04% late Tuesday.
In stock markets abroad, indexes slumped sharply again in China amid continued worries about a weak economic recovery and troubles for the country’s heavily indebted property developers.
Stocks were mixed elsewhere in Asia and in Europe.
