Losses for Big Tech pull Wall Street lower

Tech Selloff Drags Wall Street Lower from Recent Record Highs

Stocks retreated on Wall Street Tuesday as major tech companies that have powered this year’s market rally faced significant selling pressure, pushing all major indexes further from their recent all-time highs.

The technology-heavy Nasdaq experienced the steepest decline, falling 486.09 points or 2% to close at 23,348.64. The S&P 500 dropped 80.42 points, or 1.2%, settling at 6,771.55, while the Dow Jones Industrial Average lost 251.44 points, or 0.5%, ending at 47,085.24.

Despite Tuesday’s pullback, the S&P 500 remains up more than 15% for the year, having set its most recent record just last week.

Tech stocks, which typically drive broader market movements due to their outsized valuations and influence, led the decline. Palantir Technologies tumbled 7.9% despite reporting better-than-expected quarterly results. The company’s stock had more than doubled in value this year before Tuesday’s selloff.

Nvidia, a market darling throughout much of 2024, reversed course from Monday’s gains and fell 4%. Microsoft, another heavyweight in the tech sector, declined 0.5%.

“Expectations for technology firms seem higher, and disappointments appear to be having a disproportionately negative effect,” noted Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, in a communication to investors.

The selloff extended beyond tech. Animal health care provider Zoetis plunged 13.8% after cutting its annual sales forecast, while Norwegian Cruise Line slid 15.3% following a mixed earnings report and outlook. Uber dropped 5.1% despite exceeding analyst expectations in its quarterly report.

Tesla shares fell 5.1% after Norway’s sovereign wealth fund, one of the electric vehicle maker’s largest investors, announced it would vote against CEO Elon Musk’s proposed compensation package that could potentially pay him up to $1 trillion over a decade. The contentious pay plan will be voted on at Tesla’s annual meeting Thursday.

In contrast, Yum Brands jumped 7.3% after revealing it is considering selling its Pizza Hut division, which has struggled against competition in the crowded pizza market.

Corporate earnings remain a focal point for investors, with approximately three-quarters of S&P 500 companies having reported results that have largely surpassed expectations. Several major companies are scheduled to release their financial results later this week, including McDonald’s, Expedia Group, and Qualcomm.

The earnings season has taken on heightened significance amid the ongoing U.S. government shutdown, which has halted the release of key economic data. Without timely updates on inflation and employment, investors and economists face challenges in assessing the health and direction of the U.S. economy.

The data vacuum also complicates matters for the Federal Reserve as it weighs future interest rate decisions. The Fed cut its benchmark rate in October for the second time this year, but Chair Jerome Powell has indicated that further reductions aren’t guaranteed.

The central bank faces a difficult balancing act. Consumer prices rose 3% in September, the highest increase since January, while hiring has simultaneously shown signs of weakness. Cutting rates to support a softening job market could potentially fuel inflation, which remains above the Fed’s 2% target.

Wall Street currently forecasts a 70% chance of another rate cut at the Fed’s December meeting, down from 90.5% probability just a week ago before the most recent Fed meeting.

In the bond market, Treasury yields edged lower, with the 10-year Treasury yield slipping to 4.09% from 4.10% late Monday.

Overseas, European markets mostly declined while Asian markets fell overnight, reflecting the global nature of investor concerns.