Wall Street suffered sharp losses on Wednesday, especially big tech stocks, after some major companies revealed mixed profit reports.
The S&P 500 was down by 1.5 percent in late trading, marking its eighth loss in the last ten days. The index ended below the 4,200 level. The Dow Jones Industrial Average was also down by 0.32 percent, closing at 33,035.93.
Significant losses in big tech stocks led to a 2.43 percent drop in the Nasdaq composite, close to its worst performance since February 21. The small-cap Russell 2000 hit a new 52-week low, falling by 1.66 percent on the day.
In contrast, Microsoft rose 2.9 percent after reporting stronger-than-expected profit and revenue for the summer. As the second-largest company by market value, Microsoft's movements significantly impact the overall market. Microsoft's stellar earnings report helped limit the losses.
Alphabet, the parent company of Google and YouTube, beat profit expectations, but its stock fell 9.6 percent on concerns about its cloud computing business. The company's Google Cloud posted lower-than-expected revenue.
Facebook's parent company, Meta, beat top and bottom line estimates for the third quarter, reporting $4.39 per share versus $3.62 expected. Revenue of $34.15 billion also beat estimates of $33.45 billion, representing a 23 percent year-over-year increase. This is Meta's fourth consecutive earnings beat. However, its Reality Labs division lost $3.7 billion, causing Meta's shares to fall three percent.
Meanwhile, Align Technology plummeted 25 percent after offering weak fourth-quarter revenue guidance and missing estimates in the third quarter.
U.S. stock futures also fell across the board. Nasdaq 100 futures dropped 0.7 percent, following a sharp selloff in the regular session. Meanwhile, S&P 500 futures fell 0.4 percent, noticeably below its 200-day line. The Nasdaq and S&P 500 have undercut their recent lows, suggesting that their short-lived rally attempts are over.
Dow Jones futures were trading slightly below fair value, down 0.2 percent, but have not yet undercut Monday's lows. This suggests that the technical rally attempt remains intact, but the overall trend is bearish.
Rising yields put pressure on stock market
Rising Treasury yields are weighing heavily on the stock market, with the 10-year yield climbing to 4.95 percent from 4.82 percent late Tuesday.
Earlier this week, the 10-year Treasury yield reached its highest level since 2007, above five percent. High yields make stocks and other investments less attractive, slowing the economy and putting pressure on the financial system.
Many investors initially expected the Federal Reserve to cut rates soon to give the economy more breathing room. However, recent robust job market reports suggested a resilient U.S. economy. This strength has kept the economy out of a recession but could also put upward pressure on inflation.
High rates and yields have already dampened the housing market, with mortgage rates soaring to their highest levels since 2000. The Fed sought to restrain the economy enough to cool inflation without causing a deep recession.
However, a report on Wednesday morning showed that new home sales were stronger than expected in September.
New home sales have been recovering since bottoming out in the summer of 2022, as buyers have turned to new construction due to the scarcity of existing homes for sale. This is why builders offer discounts to attract buyers, causing the median home price to drop faster since 2009.