In a significant market response, both the Nasdaq Composite and the S&P 500 experienced sharp declines on Wednesday, primarily driven by notable sell-offs of shares in two prominent tech companies: Tesla and Alphabet. The Nasdaq Composite, known for its heavy weighting in technology stocks, dropped dramatically by 3.6%, settling at 17,342.4, while the S&P 500 saw a decline of 2.3%, closing at 5,427.1.
The Dow Jones Industrial Average did not fare much better, experiencing a fall of 1.3% to reach 39,853.9. It is worth noting that the tech sector suffered the most, plummeting 4.1%, marking the steepest decline across various sectors. Other sectors such as consumer discretionary and communication services also saw losses exceeding 3.7%, while utilities managed to lead the few gainers amidst a generally bearish market. Tesla, the electric vehicle manufacturer, recorded a staggering 12% drop in its stock price, registering the steepest decline on the Nasdaq and the second-worst on the S&P 500.
The company's second-quarter earnings report, released late Tuesday, revealed results that fell short of market expectations, attributed largely to reduced vehicle prices and costs related to restructuring efforts. Meanwhile, shares of Alphabet, the parent company of Google, saw a 5% drop for both Class A and C shares on Wednesday.
Despite reporting stronger-than-expected second-quarter results, Alphabet’s management expressed caution regarding the slowing trends in advertisement revenue and the anticipated tougher comparisons in the latter half of the year, as highlighted by D.A. Davidson in a note to clients. The message from the latest earnings reports for both Tesla and Alphabet is clear: heightened investor concerns regarding the concentration and influence of Big Tech stocks, which have substantially contributed to propelling Wall Street to record levels, are increasing. In the bond market, the yield on the US 10-year Treasury rose by 4.7 basis points, reaching 4.29%, whereas the yield on the two-year Treasury remained relatively stable at 4.43%. Shifting to other corporate news, Visa's shares faced a 4% decline, marking the largest drop within the Dow index.
The credit card giant's fiscal third-quarter revenue also missed market expectations, further compounding investor disappointment. Lamb Weston, the frozen food producer known for its fries, found itself at the bottom of the S&P 500 rankings, plunging nearly 28%. The company has guided for an annual decline in fiscal 2025 earnings, following an unexpected drop in revenue and fourth-quarter earnings that failed to meet forecasts. In contrast, Enphase Energy saw a remarkable gain of nearly 13% in its stock price, making it the top performer on the S&P 500.
Analysts adjusted their price targets positively after the company disclosed strong second-quarter results the previous day. AT&T, the telecommunications giant, followed suit as the second-highest gainer on the S&P 500, with shares rising by 5.2%. Despite experiencing a year-over-year decline in earnings for the second quarter, the company reported better-than-anticipated growth in postpaid phone subscribers and upheld its full-year earnings outlook, indicating a stable business model in a competitive industry. In the commodities market, West Texas Intermediate (WTI) crude oil prices experienced a modest increase of 0.6%, reaching $77.45 per barrel as government data indicated a larger-than-expected decrease in commercial crude stockpiles along with a noteworthy draw for gasoline. On the economic front, newly published government data indicated an unexpected decline in new-home sales in the US over the last month, while median prices nationwide returned to sequential growth.
The Mortgage Bankers Association reported a pullback in mortgage applications amidst decreasing interest rates across most loan types, stemming from ongoing affordability challenges due to continually high home prices. Additionally, the private sector output growth in July climbed to its highest level since April 2022, largely driven by expansion within the service sector; however, the one-year economic outlook fell to a three-month low, according to the flash purchasing managers' index released by S&P Global. Lastly, precious metals saw slight downturns as gold prices dropped 0.4% to $2,398.70 per troy ounce while silver fell by 0.8%, settling at $29.09 per ounce..