S&P and Nasdaq close at multi-week lows as Tesla, Alphabet weigh heavily
S&P 500 snaps 356-session run without a 2% decline
Worst single-day performance for Nasdaq since October 2022
Tesla posts largest daily fall since Sept. 2020 on earnings
Indexes down: Dow 1.25%, S&P 2.31%, Nasdaq 3.64%
Updates with closing prices
By David French
July 24 (Reuters) - The S&P 500 and Nasdaq ended at multi-week lows on Wednesday, with the S&P snapping one of its longest streaks without a daily decline of more than 2%, as lackluster Alphabet and Tesla earnings undermined investor confidence in megacap names.
As the first of the Magnificent Seven stocks reported quarterly numbers, investors had been awaiting new data to see if lofty valuations were justified. With these seven companies having such sway over markets, their performance was bound to have wide repercussions.
Investor reactions to the numbers contributed to the benchmark S&P 500 .SPX posting its worst one-day performance since December 2022. Its 2.3% fall marked the first time it had closed more than 2% off in 356 sessions, its longest streak since 2007.
The Nasdaq Composite .IXIC was also beaten down, posting its largest single-day percentage decline since October 2022 to finish at its lowest point since June 10. Meanwhile, the Dow Jones Industrial Average .DJI closed below 40,000 points for the first time in two weeks.
Dave Grecsek, managing director in investment strategy and research at Aspiriant, noted that the upward momentum of the first two weeks of July in equity markets had now disappeared over the last week.
"There's a little bit of profit-taking, and then people are a little apprehensive about earnings announcements upcoming," he said.
Tesla TSLA.O weighed heavily on Wednesday, slumping 12.3% in its worst single-day fall since September 2020. This came afterthe electric-vehicle maker reported its lowest profit margin in more than five years and missed second-quarter earnings estimates.
Google parent Alphabet GOOGL.O dropped 5%, to its worst finish since May 31, despitea second-quarter earnings beat, as investors focused on an advertising-growth slowdown and the company flagged high capital expenses for the year.
Tesla and Alphabet dragged the S&P 500 Communication Services .SPLRCL and Consumer Discretionary .SPLRCD sector indexes down by 3.8% and 3.9% respectively, with the Consumer Discretionary index posting its largest single-day decline since September 2022. Information Technology .SPLRCT was theweakest performer of the 11 S&P sectors though, and its 4.1% decline was its largest daily drop since October 2022.
Alphabet's losses underscored the high earnings bar for the so-called Magnificent Seven, a set of megacap tech stocks that have notched double- and triple-digit percentage gains in 2024, riding on optimism around AI adoption and expectations of an early start to the Federal Reserve's interest-rate cuts.
"When you put everything in an earnings context, you can really understand why those Mag 7 stocks have been performing so great because the earnings have been there," said Grecsek.
Any doubts, however, about the stocks meeting expectations will induce selling pressure. The other megacaps, Apple AAPL.O, Microsoft MSFT.O, Amazon.com AMZN.O, Meta Platforms META.O and Nvidia NVDA.O, all closed down between 2.9% and 6.8%.
Meanwhile, the blue-chip Dow .DJI did not escape the negativity. Visa V.N was among the stocks that weighed on it, dropping 4% afterits third-quarter revenue growth fell short of expectations.
As stocks tumbled, the Cboe Volatility Index .VIX - known as Wall Street's fear gauge - closed at 18.04, thehighest since April 19.
The S&P 500 lost 128.61 points, or 2.31%, to 5,427.13 points, while the Nasdaq lost 654.94 points, or 3.64%, to 17,342.41. The Dow Jones Industrial Average fell 504.22 points, or 1.25%, to 39,853.87.
Among others, AT&T T.N gained 5.2% afterbeating forecasts for wireless subscriber additions, while solar inverter maker Enphase Energy ENPH.O jumped 12.8% afterreporting a second-quarter operating profit beat.
Meanwhile, Roper Technologies ROP.O dropped 7.4% afterit signaled third-quarter profit would fall below estimates. Boston Scientific BSX.N traded 1.1% down, despite lifting its 2024 profit target and beating second-quarter earnings estimates.
Volume on U.S. exchanges was 12.94 billion shares, compared with the 11.48-billion average for the full session over the last 20 trading days.
Tesla's automotive gross margins https://tmsnrt.rs/4c2swJk
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru and David French in New York; Editing by Varun H K, Pooja Desai and Rod Nickel
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