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U.S. equity slumped lower Wednesday as a disappointing set of megacap tech earnings soured broader market sentiment and investors continued to reduce risk exposure amid a rapidly-changing domestic political landscape.
Stocks ended modestly lower on Tuesday, paced by a broader pullback in the S&P 500 and a reversal of the so-called ‘Trump trade’ that has favored domestically-focused stocks over those with with major ties to overseas markets.
Last night’s brace of Magnificent 7 tech earnings, however, looks set to accelerate selling in megacap tech stocks after a big earnings miss from Tesla (TSLA) and a mixed set of second quarter figures from Google parent Alphabet (GOOGL) .
Stocks are reacting sharply to the first set of second quarter earnings from Magnificent 7 peers Tesla and Alphabet.
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Tesla, which saw earnings nearly halve from last year thanks to an ongoing EV price war, posted its weakest profit margins in five years, sending shares 7.7% lower in premarket trading.
Google, meanwhile, topped Street earnings forecasts but noted that capital spending levels would remain elevated into the end of the year while global ad sales looked set for a pullback over the coming months.
Shares in the group were marked 3.4% lower in premarket trading to indicate an opening bell price of $177.39 each.
International Business Machines (IBM) and AT&T (T) will keep Wall Street’s busy earnings week on track this morning, with second quarter updates prior to the opening bell, with Ford Motor Co. (F) reporting after the close of trading.
Investors will also navigate through new home sales data for the month of June and S&P Global’s closely-tracked economic activity survey for the month of July just after the start of trading.
Donald Trump, who only last week held a commanding lead in November election polls, will travel to Charlotte, North Carolina today in what is expected to be his first of many attacks on Vice President Kamala Harris, who has overtaken the former President in certain voter surveys and set a new single-day fundraising record of $81 million earlier this week.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 suggest a 38 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 185 point pullback.
The tech-focused Nasdaq, meanwhile, is priced for a larger 200 point decline thanks in part to post-earnings reaction from Google and Tesla as well as a premarket pullback for Nvidia (NVDA) .
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In overseas markets, Europe’s Stoxx 600 was marked 0.58% lower in Frankfurt, with Britain’s FTSE 100 falling 0.14% lower in London.
Overnight in Asia, Japan’s Nikkei 225 fell 1.11% in a follow-on slump from Wall Street, paced by declines in the tech sector, while the regional MSCI ex-Japan benchmark slipped 0.35% into the close of trading.
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