In today’s stock market, technology shares are experiencing a downturn as several of Wall Street’s most influential stocks grapple with the consequences of ultrahigh expectations. The S&P 500 opened 0.5% lower, with Big Tech declines leading the Nasdaq composite to a market-leading 1.1% drop as of 9:40 a.m. Eastern time. Meanwhile, the Dow Jones Industrial Average, less focused on tech, stood out by gaining 110 points, or 0.3%.
Alphabet, despite reporting stronger-than-expected profit and revenue for the latest quarter, faced a significant setback, with its stock falling by 6.2%. Analysts highlighted concerning trends in Google’s parent company’s advertising earnings as a factor contributing to this decline. However, the overarching challenge appears to be the heightened expectations the company is grappling with, following last year’s substantial surge that outpaced the broader market. Other major tech stocks, instrumental in propelling the S&P 500 to a record rally, are also struggling against these elevated expectations.
Microsoft saw a brief dip to a loss before recovering to a 0.4% gain after delivering robust profit and revenue figures. Despite the positive results, the pressure of soaring expectations is evident in the stock’s performance. Tesla, part of the group known as the “Magnificent Seven,” experienced a 1.6% decline following a Delaware judge’s ruling that CEO Elon Musk is not entitled to a compensation package potentially exceeding $55 billion.
The Magnificent Seven, responsible for a significant portion of the S&P 500’s returns last year, faces high expectations as three more members—Amazon, Apple, and Meta Platforms—are set to report their latest quarter results on Thursday.
While not part of the Magnificent Seven, Advanced Micro Devices is influenced by similar market trends. AMD’s stock fell by 4.8%, despite meeting profit expectations for the latest quarter and slightly exceeding revenue expectations. However, its revenue forecast for the upcoming quarter fell short of analysts’ estimates.
In other market movements, easing yields in the bond market provided some support to stocks on Wall Street. Lower yields can alleviate pressure on the economy and financial system, encouraging investors to pay higher prices for stocks. The anticipation of a Federal Reserve interest rate cut later this year, driven by expectations of a cooldown in inflation, has led to declining yields since autumn.
The Fed’s decision on interest rates is awaited later in the afternoon, with widespread expectations that it will maintain its main interest rate. Reports on slower growth in pay and benefits for U.S. workers in the last quarter of 2023 and softer hiring by non-government employers in January may provide insights into the Fed’s considerations. These reports could address concerns about excessive pay gains leading to sustained inflation or a potential recession.
Yields on the 10-year Treasury fell to 3.96% from 4.04% late Tuesday. In global markets, Chinese indexes slumped amid concerns about a weak economic recovery and challenges faced by heavily indebted property developers. Stock performance in other parts of Asia and Europe remained mixed.
Featured Image: Megapixl © Alexandersikov
