Global stock markets tumbled Wednesday following a batch of disappointing corporate results in the United States and Europe.
The slump came after US electric car giant Tesla — one of the “Magnificent Seven” stocks that have fueled a global rally this year — reported a drop in second-quarter profits.
Wall Street’s main indices retreated, with the tech-heavy Nasdaq Composite index finishing 3.6 percent lower.
The bruising investor response also followed earnings from Google parent Alphabet, which added to worries about tech heavyweight equity valuations.
European and Asian markets closed lower.Wednesday’s downcast reaction to results “feeds some angst about the mega cap stocks not being able to deliver stock performance,” said Briefing.com analyst Patrick O’Hare.
Even strong results next week from Apple, Amazon and other tech giants may not be received well by Wall Street, he added.Tesla shares plummeted more than 12.3 percent.
Shares in Alphabet fell 5.0 percent after the company topped analyst estimates in general but reported disappointing figures for its YouTube business.
Alphabet is also one of the so-called “Magnificent Seven” tech kings that have been key to driving gains in markets.
The others — Apple, Amazon, Facebook parent Meta, Microsoft and Nvidia — are due to issue earnings reports over the coming weeks.
“Two of the Magnificent Seven stocks failed to create euphoria when they reported their second quarter results yesterday,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The less-than-ideal set of earnings comes at a time when investors are questioning whether the AI rally has gotten ahead of itself,” she added.
Equities have largely been boosted this year by growing expectations that the US Federal Reserve will cut interest rates thanks to slowing inflation and a softening of the labor market.
The prospect of a more welcoming borrowing environment has heavily benefited tech firms, particularly as they have invested massively in artificial intelligence, seeing it as the next big money-spinner.
“It is hard to see how the rally in markets can continue for now after several weaker than expected earnings reports including Tesla, LVMH and the US Postal Service,” said Kathleen Brooks, research director at trading platform XTB.
The Paris CAC 40 retreated 1.1 percent, with shares in luxury giant LVMH falling 4.5 percent after it posted a 14 percent drop in net profit in the first half of the year.
The Frankfurt DAX was also in the red, shedding 0.9 percent, with Deutsche Bank sinking 8.6 percent after it reported a loss of 143 million euros ($155 million) in the second quarter.
This week, investors await US economic growth data and the latest reading on personal consumption expenditure — the Fed’s favored gauge of inflation — which could play a role in decision-makers’ thinking ahead of the bank’s next meeting.
“Attention is now turning to the Bank of Japan meeting next week, and there is growing speculation that the central bank will raise interest rates by 10 basis points,” said market analyst Fawad Razaqzada at City Index and FOREX.com.
Traders are also treading cautiously as they weigh the outlook for US policy after the November presidential election.
The Democratic Party’s chances have been boosted by the likely nomination of Kamala Harris to replace President Joe Biden atop the ticket in the face-off against Republican Donald Trump.
– Key figures around 2015 GMT –
New York – Dow: DOWN 1.3 percent at 39,853.87 points (close)
New York – S&P 500: DOWN 2.3 percent at 5,427.13 (close)
New York – Nasdaq Composite: DOWN 3.6 percent at 17,342.41 (close)
London – FTSE 100: DOWN 0.2 percent at 8,153.69 (close)
Paris – CAC 40: DOWN 1.1 percent at 7,513.73 (close)
Frankfurt – DAX: DOWN 0.9 percent at 18,387.46 (close)
EURO STOXX 50: DOWN 1.1 percent at 4,861.87 (close)
Tokyo – Nikkei 225: DOWN 1.1 percent at 39,154.85 (close)
Hong Kong – Hang Seng Index: DOWN 0.9 percent at 17,311.05 (close)
Shanghai – Composite: DOWN 0.5 percent at 2,901.95 (close)
Euro/dollar: DOWN at $1.0842 from $1.0855 on Tuesday
Pound/dollar: DOWN at $1.2905 from $1.2907
Dollar/yen: DOWN at 153.99 yen from 155.62 yen
Euro/pound: DOWN at 83.99 pence at 84.08 pence
West Texas Intermediate: UP 0.8 percent at $77.59 per barrel
Brent North Sea Crude: UP 0.9 percent at $81.71 per barrel
© 2024 AFP
