The Nasdaq led US stocks lower before the bell Wednesday, after disappointing Alphabet and Tesla earnings stirred up worries that Big Tech’s power to fuel gains is fading.
Futures on the tech-heavy Nasdaq 100 () sank almost 1%, while S&P 500 futures () fell roughly 0.7%. Dow Jones Industrial Average futures () retreated 0.4%, after a losing Tuesday for all three gauges.
Stocks are sinking as investors digest mixed quarterly earnings from Google parent Alphabet (GOOGL, GOOG) and Tesla (TSLA), the first of the “Magnificent 7” megacaps to report. Those results have set Wall Street wondering whether the dominant tech stocks behind this year’s rally now face sell-offs, amid questions about AI’s potential boost to their growth.
EV maker Tesla’s stock price slid almost 8% in pre-market trading, while Alphabet shares dropped over 3%.
At the same time, the ongoing rotation out of tech stocks into small caps could alleviate headwinds for gains. The Russell 2000 (^RUT) has outperformed the major indexes in the past two days.
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Investors are bracing for the next wave of earnings to flood in, with AT&T (T), Chipotle (CMG), Ford (F), IBM (IBM), and General Dynamics (GD) due to post results on Wednesday.
Also ahead are readings on US manufacturing and services activity in July, ahead of Thursday’s second-quarter GDP print and Friday’s key report on June PCE inflation, the report favored by the Federal Reserve.
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