NEW YORK (AP) — After riding a handful of Big Tech superstars to dozens of all-time highs this year, Wall Street is feeling the downside of growing so beholden to a handful of dominant elites. Drops for Tesla and Alphabet are dragging indexes lower on Wednesday, even though roughly as many stocks are rising as falling.
The S&P 500 was down 1.1% in early trading and on track for its fifth fall in six days. The Dow Jones Industrial Average was down 144 points, or 0.4%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 1.8% lower.
Tesla was one of the heaviest weights on the market after falling 9.9% 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 5.2% 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 for all of Wall Street, but particularly so for the 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 majority of the S&P 500’s run to records, 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 jumped at least 1% in seven of the last 10 days, and it was close to flat 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 ahead of a report that will give a preliminary look at U.S. business activity in July. Similar readings were weaker than expected for Europe.
The yield on the 10-year Treasury fell to 4.21% 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 3.8% after its profit for the latest quarter matched analysts’ expectations. But Visa lost 3.5% after its revenue for the latest quarter came up just short of analysts’ expectations.
Lamb Weston lost a fifth of its value 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 1.1% as shares of luxury giant LVMH dropped 3.4% 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.