NEW YORK: The tech-heavy Nasdaq and the S&P 500 dropped on Wednesday as Alphabet slumped after its cloud division missed revenue estimates, while other mega-cap stocks were also pressured by rising US Treasury yields.
Google-parent Alphabet slid 9.1% to a three-month low, as its cloud business crawled to its slowest growth in at least 11 quarters.
The communication services sector fell 5.2%, on track for its worst single-day drop in a year, and touched a near one-month low.
Microsoft, on the other hand, rose 2.7% to a three-month high after topping expectations for first-quarter results in all segments, including its cloud business.
“Generative AI was supposed to boost Google’s cloud revenue and that clearly did not happen. Surging Treasury yields and mixed earnings have stock investors hitting the sell button,” Edward Moya, senior market analyst at OANDA, said.
Other megacaps including Apple and Amazon.com fell 1% and 4.8%, respectively, as Treasury yields climbed after data showed accelerating new home sales in September, affirming expectations of prolonged high interest rates heading into 2024.
Focus will be on Meta Platform’s results after the bell, with the company expected to report its best quarterly sales growth in nearly two years. The company’s shares were down 2.6% amid the broader tech decline.
Among other major S&P 500 sectors, consumer discretionary and real estate were among the worst hit, while utilities was the top gainer.
The Dow Jones Transport Average index fell to a more than four-month low, following a 5.6% decline in trucking firm Old Dominion Freight Line after quarterly results.
Defense contractor General Dynamics rose 3.6% after reporting a jump in third-quarter revenue.
Of the 146 S&P 500 companies that have reported so far, 80% have beaten analysts’ earnings expectations, according to LSEG data. Quarterly earnings are expected to grow 2.6% year-on-year.
Israel has agreed to delay an expected invasion of Gaza for now so that the United States can rush missile defences to the region to protect US troops there, the Wall Street Journal reported on Wednesday, citing US and Israeli officials.
At 12:10 p.m. ET, the Dow Jones Industrial Average was up 0.54 points at 33,141.92, the S&P 500 was down 45.00 points, or 1.06%, at 4,202.68, and the Nasdaq Composite was down 240.12 points, or 1.83%, at 12,899.76.
Investors will also monitor third-quarter gross domestic product, durable goods and personal consumption expenditure data through the rest of the week.