On Wednesday, benchmark equity indexes in the United States faced significant declines, primarily driven by sell-offs of Tesla and Alphabet stocks following their respective earnings reports. The Nasdaq Composite experienced a steep decline of 3.6%, closing at 17,342.4, while the S&P 500 fell 2.3% to reach 5,427.1.
The Dow Jones Industrial Average also retraced, dropping 1.3% to 39,853.9. Among various sectors, technology faced the harshest brunt, with a 4.1% slump, while consumer discretionary and communication services both reported losses exceeding 3.7%. However, utilities emerged as the leading sector, managing to secure gains amidst the turmoil. Tesla’s stock was notably impacted, plummeting 12%, marking the most significant decline on the Nasdaq and the second-largest on the S&P.
The electric vehicle manufacturer released its Q2 earnings late Tuesday, which fell short of market expectations, primarily due to reduced vehicle prices and costs related to restructuring. Meanwhile, Alphabet witnessed a decrease in both its class A and C shares, each falling by 5%. Although the parent company of Google reported stronger-than-expected Q2 results, management signaled caution regarding slowing advertisement trends and more challenging year-on-year comparisons in the latter half of the year, according to a report by D.A.
Davidson. The disappointing results from Tesla and Alphabet have amplified investor anxiety concerning the heavy reliance on Big Tech stocks that have been pivotal in driving Wall Street to record heights. In fixed income markets, the US 10-year yield rose by 4.8 basis points to 4.29%, while the two-year rate remained mostly unchanged at 4.42%. Turning to other corporate developments, Lamb Weston experienced a sharp drop of 28% in its stock, the largest loss on the S&P.
The frozen potato products company indicated an anticipated annual decline in fiscal 2025 earnings after reporting an unexpected decrease in revenue and earnings below market forecasts in fiscal Q4 due to challenging market conditions. In a positive turn, Enphase Energy’s shares surged by 13%, making it the top gainer on the S&P 500, encouraged by analysts raising their price targets, likely influenced by the company’s inline revenue outlook for Q3. AT&T also saw its stock rise by 5.2%, ranking as the second-largest increase on the S&P.
Despite a dip in Q2 earnings compared to the previous year, the telecommunications giant noted that its postpaid subscriptions increased beyond expectations, and it maintained its full-year earnings outlook. Market dynamics were also reflected in commodity prices, with West Texas Intermediate crude oil climbing 0.8% to $77.54 per barrel.
Government data indicated that commercial crude stockpiles in the United States decreased more than anticipated last week, alongside a significant drawdown in gasoline inventories. In broader economic news, unexpected declines in new-home sales were reported for the last month, despite a return to sequential growth in median prices at the national level, as revealed by government data.
Additionally, the Mortgage Bankers Association highlighted a pullback in US mortgage applications last week, notwithstanding a decrease in interest rates across most loan types, driven by ongoing affordability challenges amidst elevated home prices. Finally, US private-sector output growth in July rose to its highest point since April 2022, led primarily by the service sector, whereas the one-year outlook saw a decline to a three-month low, according to the flash purchasing managers' index from S&P Global. In commodity markets, gold prices fell by 0.3% to $2,399.30 per troy ounce, while silver dropped by 0.8% to settle at $29.11 per ounce..