Wall Street suffered its worst day of trading in 19 months as disappointment around earnings from Tesla and Google challenged the recent big-tech rally.
The benchmark S&P 500 index dropped 2.3% as a sell-off triggered its biggest single-day fall since December 2022.
The technology-focused Nasdaq retreated 3.6%, its largest single-day decline since October 2022.
Shares in Tesla sank 12% after it reported a 45% slump in quarterly profits amid discounting by electric carmakers. Alphabet, the owner of Google and YouTube, also fell 5% as investors scrutinized a slowdown in advertising growth.
The two companies were the first out of the gate as America’s tech giants update shareholders on their recent performance. Over the coming weeks, the rest of the so-called “Magnificent Seven” tech heavyweights – Meta, owner of Facebook, Instagram and WhatsApp; Apple; Nvidia; Microsoft; and Amazon – are set to follow.
“I can’t help thinking [that] if the tech sector does sneeze, the whole market could catch it,” said David Morrison, senior market analyst at Trade Nation.
Danni Hewson, head of financial analysis at AJ Bell, said: “Whilst Alphabet’s news wasn’t awful, the fact they’re still ploughing billions into [artificial intelligence] has caused some to begin questioning when enough will be enough, or at least when the expenditure will deliver the kind of results investors have been salivating over elsewhere in the AI space.
“Elon Musk’s attempts to get investors to look anywhere but at the bottom line has also backfired. Even if Tesla’s CEO insists the company isn’t just a carmaker, until robots or robo-taxis start to make money, EVs are the only game in Tesla town, and margins have been wrung out.”
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Reuters contributed reporting
