US Stock Market Today: S&P 500 Falls 0.2% & NASDAQ Dips 0.5%, as Tech Weakens, & Gold Extends Losses Amid Earnings Season

Global markets performed poorly on Wednesday as technology stocks retreated and gold extended recent losses. Investors reassessed valuations after a strong earnings season and a steady rally in major equity indexes. The S&P 500 fell 0.2% by mid-morning in New York, while the NASDAQ 100 dropped 0.5%. The Dow Jones Industrial Average also slipped 0.2%.

European stocks traded flat, with the Stoxx Europe 600 little changed, and the MSCI World Index declined 0.2%. The Bloomberg Magnificent 7 Total Return Index, tracking top technology companies, edged down 0.1%, signaling fatigue in the recent tech-led rally.

Tech Stocks Drag Down Markets

A decline in major technology shares pressured US indexes. Netflix dropped about 6% in extended trading after reporting in-line results but disclosing a tax dispute in Brazil that weighed on earnings. Texas Instruments issued a weak forecast, adding to concerns about semiconductor demand. Tesla shares fell ahead of its quarterly report, despite the company's stock doubling in value over the past year.

Analysts warn the market's rally could be nearing exhaustion. Fiona Cincotta of City Index stated that investors now require solid fundamentals to support high valuations. Tesla, trading at nearly 195 times expected earnings, remains the most expensive of the "Magnificent Seven." Apple follows with a valuation of just over 32x expected earnings.

Despite recent downturns, strategists remain cautiously optimistic. Thomas Lee of Fundstrat Global Advisors, due to resilient corporate profits and ongoing investor confidence, projected that the S&P 500 could reach 7,000 by year's end.

Corporate Earnings and Market Sentiment

Earnings season continues to come in very strong. Around 85% of S&P 500 firms that have reported so far have surpassed profit forecasts, the strongest performance since 2021. Analysts attribute this to expectations having been raised ahead of the reporting period, with some sectors posting strong results.

Financial and industrial firms have performed exceptionally well. Citigroup and Morgan Stanley beat projections, while General Motors raised its annual profit outlook on robust truck sales. Coca-Cola exceeded expectations as demand for its beverages held steady despite higher prices.

JPMorgan Chase & Co. analysts expect corporate earnings to grow 12% in the third quarter, higher than the 7.7% market consensus. They cite strong consumer spending, investment in artificial intelligence, and fiscal stimulus as key drivers of growth.

However, some strategists warn that trade tensions and slowing earnings revisions could negatively impact sentiment. Michael Wilson of Morgan Stanley highlighted these risks as potential headwinds for equities in the near future.

Gold, Bonds, and Commodities

Gold extended its recent losses, falling 2.6% to $4,016.49 per ounce, after plunging 5% the previous evening, its steepest one-day decline since 2020. Analysts said the drop reflected profit-taking after an extended rally. Spot gold earlier traded near $4,039.48, while US gold futures slipped 1.4% to $4,050.64 per ounce.

In the bond market, the 10-year US Treasury yield rose one basis point to 3.97%. Germany’s 10-year yield increased to 2.57%, while the UK’s benchmark yield declined to 4.42%. The dollar remained steady, with the euro at $1.1611 and the yen trading near 151.87 per dollar.

Crude oil prices moved up with West Texas Intermediate gaining 2.4% to $58.63 per barrel. Energy stocks remained split between performance, as investors factored in supply trends and global demand trends.

Outlook

Analysts anticipate continued market volatility in the near future as investors assess earnings and economic data. Upcoming reports from Tesla and IBM are expected to impact sentiment, particularly within the technology sector.

Despite challenges, analysts at Oppenheimer Asset Management observe durability in corporate earnings as a supportive element for equities. The lifting of the blackout period for buybacks may also generate further demand for US stocks in the forthcoming weeks.

With inflation concerns and monetary policy uncertainty, markets may trade narrowly. Investors focus on earnings, AI growth, and the potential for Fed rate cuts easing the month.

Also Read: US Stock Market Today: S&P 500 and NASDAQ Rise 0.5%, as Markets Focus on Earnings and Trade Developments