Nasdaq 100: Tech Stocks Tumble, Market Sentiment Turns Bearish

Tech Earnings Disappoint, Stocks Slide

U.S. stocks fell on Wednesday as disappointing earnings from tech giants Alphabet and Tesla weighed on market sentiment. The weak performance of these megacap companies has raised concerns about the sustainability of the market’s recent rally.

At 14:11 GMT, the Dow Jones Industrial Average is trading 39975.02, down 383.07 or -0.95%. The S&P 500 Index is at 5478.96, down 76.78 or -1.38% and the Nasdaq is trading 17647.72, down 349.64 or -1.94%.

Alphabet and Tesla Miss Expectations

Shares of Google parent Alphabet dropped over 4% despite beating top and bottom-line estimates. Investors focused on YouTube’s advertising revenue, which fell short of consensus expectations. Tesla’s stock plummeted more than 10% following weaker-than-expected results and a 7% year-over-year decline in auto revenue.

Market-Wide Impact

The disappointing results from Alphabet and Tesla had a ripple effect across the tech sector. Nvidia and Meta Platforms each lost more than 3%, while Microsoft declined by 1%. These megacap tech stocks have been responsible for the bulk of this year’s market gains, making their performance crucial for overall market sentiment.

Sector Performances

The technology sector led the declines, dragged down by the poor performance of its major players. In contrast, rate-sensitive sectors such as small caps and industrials have shown strength in recent weeks, benefiting from growing confidence in a potential soft landing and anticipated interest rate cuts.

Earnings Season Overview

Despite the tech sector’s struggles, the broader earnings season has started strong. Over 25% of S&P 500 companies have reported second-quarter earnings, with approximately 80% surpassing expectations, according to FactSet data.

Oil Markets Rebound

U.S. crude oil futures broke a three-day losing streak, rising more than 1% on Wednesday. The American Petroleum Institute reported a 3.86 million barrel decline in U.S. crude inventories for the week ended July 19, marking the fourth consecutive week of inventory declines.

Market Forecast

The market outlook appears cautiously bearish in the short term. The disappointing performance of key tech companies may lead to a rotation away from the tech-heavy “magnificent seven” stocks that have driven much of this year’s gains. However, the overall strong start to the earnings season and the Federal Reserve’s anticipated interest rate cut in September could provide some support. Investors should closely monitor upcoming earnings reports and economic data for further direction.

E-mini Nasdaq-100 Index futures crossed to the weakside of the 50-day moving average at 19686.02, triggering an acceleration to the downside. This indicator is new resistance.

Given the current downside momentum, we’re looking for the selling pressure to extend into an intermediate 50% level at 19178.50.