U.S. stocks fell on Wednesday after weak earnings at Alphabet (GOOGL) and Microsoft (MSFT) raised fears that the slowdown in production could weigh on corporate profits in the months ahead.
The tech-heavy Nasdaq Composite (^IXIC) fell 2%, while the S&P 500 (^GSPC) fell 0.7%, snapping three-day winning streaks for the indices. The Dow Jones Industrial Average (^DJI) rose 0.01% after swinging throughout the day.
Stocks have rallied lately, posting three straight days of gains ahead of Wednesday’s selloff. After Tuesday’s closing bell, however, Microsoft posted its weakest quarterly revenue growth in five years as the strong dollar and falling PC sales dampened the tech giant’s growth. Microsoft shares closed down 7.7%, while intraday stock saw the biggest drop since March 2020.
Alphabet, Google’s parent company, posted results that fell short of analysts’ revenue expectations, while YouTube posted its first decline in digital advertising revenue since the company began reporting. performance of the video unit. Shares of the company closed more than 9%, its worst one-day loss since 2020.
“The fact is we’re heading into, whether we want to call it a recession or not, we’re headed into a softer or tighter macroeconomic environment. … You hear that from all the software companies,” said RBC Capital Markets software equity analyst Rishi Jaluria told Yahoo Finance Live Tuesday after quarterly earnings reports.
“It was disappointing,” Ali Mogharabi, senior equity analyst at Morningstar, told Yahoo Finance Live on Tuesday. Youtube’s drop in digital ad revenue was partly due to “foreign currency headwinds,” but the bigger picture here is the economic downturn, he explained.
“Many advertisers are increasingly hesitant. They may be holding back their ad spend a bit. But at the same time, even in an economic downturn, you see the importance of this digital transition of this migration to the cloud,” Mogharabi said.
After Wednesday’s closing bell, Facebook’s parent company Meta Platforms (META) also reported earnings that beat expectations, sending shares plunging after hours.
The slowdown trickled down to the technology sector. Meta Platforms fell 5.6% before losing profits, while Amazon (AMZN) fell 4.1%.
While tech stocks have been down this year, mega-cap tech stocks still weigh heavily on major indexes. The five largest technology companies – Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (FB), Apple (AAPL) and Amazon (AMZN) – alone account for around a quarter of the market capitalization of the S&P 500 index. .
Elsewhere in earnings on Wednesday, automaker Ford (F) reported earnings that beat the top line. However, shares fell after hours as Ford lowered its full-year earnings forecast.
The market also digested earnings from Chipotle (CMG), which on Tuesday reported results slightly above market expectations. Most of its sales figures came from another round of menu price increases as the company navigated inflationary pressures. Spotify (SPOT), meanwhile, added more users on its free and paid tiers than expected in the third quarter. The streaming company reported a 19% increase in ad revenue, but said sales fell due to the “difficult macro environment”. Spotify sank 13% on the day.
Finally, Boeing on Wednesday became the latest company to report a third-quarter loss and revenue that fell short of analysts’ expectations in a “challenging environment.”
Twitter’s dramatic acquisition deal was also on Wall Street’s plate. Elon Musk has until Friday night to close the deal on his $44 billion acquisition or face a legal battle in Delaware Chancery Court next month. Musk posted a video of himself at Twitter headquarters on Wednesday.
“Once the Twitter deal closes on Friday (which is our expectation) and Musk sells his needed Tesla stock, this painful 6-month overhang will be over and Tesla investors can finally focus on the future and see the next chapter in the growth story set in 23 despite macro,” Dan Ives, analyst at Wedbush Securities wrote on Twitter following the news of the case.
In the crypto market, Bitcoin (BTC) surged above $20,000 for the first time in about three weeks as trading volume declined for the quarter.
Yields on U.S. Treasuries were down on Wednesday as the dollar weakened, marking its lowest level in three weeks. While stocks have rebounded over the past week, bonds have continued to slide, marking a potential disconnect between a stable market trend this year.
In the northern United States, the Bank of Canada raised its key rate by half a percentage point, taking it from 3.25% to 3.75%, the highest level in nearly 14 years. Economists surveyed had expected a larger increase of 75 basis points.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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