The US stock market experienced a turbulent Thursday morning as disappointing third-quarter results from Big Tech behemoths and surging Treasury yields weighed heavily on investors’ sentiment. Here’s a closer look at the developments that unfolded:
Tech Turmoil Takes Toll
The tech-centric Nasdaq Composite bore the brunt of the downturn, plummeting by 0.5%, plunging further into correction territory. It now stands more than 10% below its recent peak in July, signaling increased volatility in the tech sector. The Dow Jones Industrial Average also saw a dip of 0.1%, while the S&P 500 registered a 0.3% drop.
This decline followed Wednesday’s slump, which saw the S&P 500 hit its lowest point since May, and the Nasdaq experienced its worst day since February, with a sharp 2.4% decline.
Meta’s Misstep
One of the most significant drops was observed in Meta Platforms Inc., the parent company of Facebook, as its shares slid by about 2.6% on Thursday morning. Meta reported softer-than-expected advertising revenue for the quarter. Although Meta outperformed expectations, recording a year-over-year revenue increase of 23%, Wall Street raised concerns about its Reality Labs division, which incurred a $3.7 billion loss.
Alphabet’s Alphabet Falls Short
Google-parent company Alphabet faced a similar fate, with its shares tumbling by 9.5% on Wednesday. While the company surpassed earnings expectations on Tuesday, it fell short in its cloud business. This drop marked the most substantial decline in Alphabet’s stock since March 2020, and its shares declined by another 2.2% on Thursday morning.
Tech Titans Tumble Together
Notably, other major tech companies experienced parallel declines. Apple, despite a modest 0.2% drop, was not spared. Amazon, set to report its earnings later on Thursday, experienced a 0.9% dip. Microsoft also saw its shares fall by 0.4% on Thursday, despite posting impressive Q3 results with $56.5 billion in revenue, reflecting a 13% year-over-year sales growth. Microsoft’s quarterly profits soared to $22.3 billion, marking a 27% increase from the previous year.
Tech’s Weight on the S&P 500
The influence of the top US tech companies, including Apple, Amazon, Nvidia, Microsoft, and Alphabet, cannot be understated. Together, they account for a quarter of the S&P 500’s total value, making their performance pivotal for investors’ portfolios.
Tech Meets Treasury Yields
Tech stocks have also been impacted by the surge in Treasury yields. On Thursday morning, the 10-year yield hovered near the critical 5% threshold. This occurred as investors digested a report showcasing the US economy’s remarkable strength in the third quarter, despite interest rates reaching their highest level in 22 years. The Commerce Department reported a 4.9% annualized growth rate in GDP, surpassing economists’ expectations of 4.3% and exceeding the second quarter’s 2.1% pace.
As tech stocks grapple with these challenges, the broader implications for the market and investors remain uncertain. The confluence of disappointing earnings, rising Treasury yields, and robust economic growth has created a complex landscape that will undoubtedly be closely monitored in the days ahead.
In this ever-shifting market, only time will reveal the lasting impact of these developments on the US stock market and the broader economy.