The News
US stock markets plunged on Wednesday, recording their worst losses since 2022, after investors sold off shares in struggling tech companies.
The Nasdaq index fell by 3.6%, the S&P 500 dropped 2.3%, and the Dow Jones Industrial average slid 1.2%.
“Signs of nervousness around tech stocks began to creep up in recent weeks,” reported Reuters, pointing to Wall Street’s “vulnerability to any weakness in the Big Tech trade.”
SIGNALS
Magnificent Seven drops rattled markets
Tumbling shares from the Magnificent Seven — stocks belonging to Big Tech — led the tech-heavy Nasdaq index downwards. The drops followed disappointing financial results from Tesla and Google parent Alphabet Inc: Tesla stocks dropped by 12% earlier this week, following a disastrous second quarter. Alphabet, meanwhile, reported record-high operating profits — but failed to inspire investors amid the artificial intelligence hype, The Wall Street Journal noted. For Tesla, which has touted itself as “more than a car company,” the quarterly earnings report forces the company “to report actual numbers, bringing AI-crazed investors crashing back to earth,” the Journal noted.
Asia markets slumped too — except in India, where markets are rallying
Asia’s Nikkei index closed down 3.28%, its lowest level since April, in a drop that seemed to be related to the troubles in US markets. “Higher volatility after U.S. consumer price index data looks to have had a greater impact on commodity trading advisors’ decision to sell,” Yoshitaka Suda, a quantitative strategist at Nomura Securities, told Nikkei Asia. More positive financial news came from India: The country is rapidly catching up with China to become the world’s largest emerging market, reported the Financial Times.
Economic downturn in China is hitting European firms
European companies across sectors have been hit by China’s economic slowdown. As Chinese consumers move away from non-essential purchases in an effort to rein in spending, sales are down and impacting profit margins in Europe. “We are concerned about the exposure to China” and “weaker-than-anticipated demand,” Arun Sai, a senior multi-asset strategist at Pictet Asset Management, told Bloomberg. These issues will ripple into US tech stocks as well: The economic downturn, alongside rising local competitors in electric vehicle and technology industries, means tech companies are seeing their market shares diminish in China.