NEW YORK (AP) — Drops for Big Tech are dragging U.S. stock indexes lower on Wednesday after profit reports for Tesla and Alphabet hit Wall Street with a thud.
The S&P 500 was down 1.3% in morning trading and on track for its fifth fall in six days. The Dow Jones Industrial Average was down 342 points, or 0.8%, as of 10 a.m. Eastern time, and the Nasdaq composite was 2% lower.
Tesla was one of the heaviest weights on the market after falling 12.5% The electric vehicle maker said its profit for the spring fell 45% from a year earlier, and its earnings fell short of analysts’ forecasts.
Alphabet dropped 3.3% even though it delivered better profit and revenue for the latest quarter than expected. Analysts pointed to some pockets of weakness underneath the surface, including weaker growth in advertising revenue for YouTube than expected.
The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50% in the 12 months through Tuesday night, on expectations for continual growth.
Profit expectations are high all along Wall Street, but particularly so for the small group of stocks that have come to be known as the “ Magnificent Seven.” Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla need to keep delivering powerful growth after being responsible for the majority of the S&P 500’s run to dozens of records this year, while many other stocks struggled under the weight of high interest rates.
The hope on Wall Street is that if momentum does flag for the Magnificent Seven, more stocks outside them can rise to support the market. Conditions may be improving at the right time. Hopes for imminent cuts to interest rates have helped smaller stocks in particular to jump in recent weeks.
The Russell 2000 index of smaller stocks has leaped at least 1% in seven of the last 10 days, though it fell 0.8% Wednesday.
They’ve been jumping as Treasury yields have eased on expectations that inflation is slowing enough for the Federal Reserve to begin lowering its main interest rate in September.
Treasury yields fell again Wednesday after preliminary data suggested U.S. business activity is back to shrinking in manufacturing, though continuing to grow in services industries. Similar readings in Europe were weaker than expected. A separate report said sales of new homes unexpectedly weakened, when economists were forecasting an acceleration.
The yield on the 10-year Treasury edged down to 4.23% from 4.25% late Tuesday and from 4.70% in April. That’s a sharp move for the bond market, which has given support to stock prices.
AT&T was a bright spot for the stock market, rising 3.9% after its profit for the latest quarter matched analysts’ expectations.
But Visa lost 3.6% after its revenue for the latest quarter came up just short of analysts’ expectations.
Lamb Weston lost nearly 22% for the worst loss in the S&P 500 after the supplier of French fries and other frozen potato products to restaurants reported weaker profit for the latest quarter than expected. The company said even fewer patrons visited restaurants during the spring than it expected in the United States and many of its key international markets. It also warned it sees challenges continuing into its fiscal year because of softer demand due to “menu price inflation.”
In stock markets abroad, indexes slumped across Europe and Asia.
France’s CAC 40 index fell 0.9% as shares of luxury giant LVMH dropped 3.6% in Paris after the owner of Louis Vuitton and Dior reported quarterly sales that missed expectations.
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AP Business Writer Matt Ott contributed.
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