On Wednesday, the US stock market experienced a significant decline, with the Nasdaq falling by 3%, marking its worst trading day of the year. The technology sector led the decline, as investors reacted to disappointing earnings from Tesla and Alphabet. Tesla missed earnings estimates for the second quarter, while Alphabet reported that YouTube ad revenue fell short of expectations in the last quarter. As a result, Tesla shares dropped more than 10% and Alphabet shares fell by 5%.
Analysts are now questioning how these earnings misses will impact investor sentiment going forward. More high-profile tech companies, including Meta, Apple, and Amazon, are set to report their financials next week, adding to the uncertainty in the market.
In addition to earnings reports, investors are also monitoring economic data, with second-quarter GDP figures set to be released on Thursday and the Federal Reserve's preferred inflation measure to be published on Friday. The personal consumption expenditures index is expected to show a cooling in inflation, with prices rising by 2.5%, while GDP is forecasted to increase by 2.1%, higher than the previous quarter.
Despite the market downturn, there are bullish signals suggesting potential gains ahead, according to Bank of America. UBS also predicts a rotation from cash to stocks, potentially pushing the S&P 500 up by 17% by the end of the year.
In commodities, oil futures rose, with West Texas Intermediate crude oil up 0.9% to $77.65 a barrel and Brent crude up 0.7% to $81.57 a barrel. Gold prices inched higher to $2,417 an ounce, while the 10-year Treasury yield dropped slightly to 4.218%. Bitcoin also saw a slight increase, reaching $66,723.
Overall, the market is facing volatility and uncertainty as investors navigate through a challenging earnings season and economic data releases.