The story: The S&P 500 and Nasdaq suffered their biggest one-day declines in nearly two years on Wednesday, dragged down by the same big technology companies that have driven this year’s gains.
The Dow fell 1.25%, the S&P 500 lost 2.3% and the tech-heavy Nasdaq plunged more than 3.6%.
As the first of the Magnificent Seven stocks reported their latest quarterly earnings, investors focused their attention on whether their lofty valuations were justified.
Alphabet Inc. lost more than $100 billion in market capitalization on Wednesday, despite reporting better-than-expected second-quarter profit, with its shares falling 5% as investors focused on slowing advertising growth and a stronger-than-expected increase in AI-related expenses.
Tesla also reported its lowest profit margin in more than five years and missed second-quarter profit expectations, sending its shares down more than 12%.
But Will McGough, investment strategist at Prime Capital Financial, sees the declines in both stocks as a buying opportunity, even as weak electric vehicle sales threaten to cast a dark shadow over Tesla’s future.
“Tesla is a very confusing stock in my opinion, they are confusing the Street with what it actually is.
“Is Tesla going to be an electric car company? Is it going to be a battery company? Is it going to be robots? Is it going to be AI? Is it going to be a combination of all of these? And I think the combination of all of these is why Tesla is an interesting opportunity going forward as part of the Mag Seven.”
Other large caps Apple, Microsoft, Amazon and Meta Platforms all ended lower, with AI darling Nvidia’s shares falling the most, down 6.8%.
Visa was among the stocks weighing on the Dow, dropping 4% after the credit card giant reported weaker-than-expected third-quarter revenue growth.
As stock prices plummeted, the VIX Volatility Index, known as Wall Street’s fear gauge, closed at its highest level since April 19.
But there were some bright spots, including AT&T, which rose more than 5% on better-than-expected growth in wireless subscribers.