The S&P 500 and Nasdaq ended at multi-week lows on Wednesday, with the S&P snapping one of its longest streaks without a daily decline of more than 2%, as lackluster Alphabet and Tesla earnings undermined investor confidence in megacap names.
Market Snapshot
The S&P 500 lost 128.61 points, or 2.31%, to 5,427.13 points, while the Nasdaq lost 654.94 points, or 3.64%, to 17,342.41. The Dow Jones Industrial Average fell 504.22 points, or 1.25%, to 39,853.87.
Market Movers
Tesla Motors declined 12% after the electric-vehicle maker reported second-quarter profit that missed analysts’ expectations but better-than-anticipated revenue. Adjusted earnings of 52 cents a share came up short of expectations of 61 cents and were down from 91 cents a share a year earlier. Tesla’s profit dropped for a second-straight quarter. The company’s operating profit margin in the period was 6.3%, below estimates of 8%.
Shares of other EV makers also traded lower. Rivian Automotive, Inc. fell 7% and Lucid Group Inc was down 5.6%.
Alphabet reported earnings of $1.89 a share in the second quarter, topping analysts’ estimates of $1.85 a share, as revenue of $84.74 billion surpassed estimates of $84.3 billion. For the first time, Alphabet’s cloud revenue exceeded $10 billion in the second quarter, up from $8 billion in the year-earlier period. Ad sales increased 11.1% but slowed from the first quarter’s growth of 13%.
The company continued its heavy capital investments in the cloud and artificial-intelligence systems. Capital spending in the second quarter was $13.2 billion, up from $12 billion in the first quarter and less than $7 billion in June 2023. Shares of Alphabet, the parent company of Google and YouTube, were down 5%.
NVIDIA Corp fell 6.8% following Alphabet’s earnings report. While capital spending jumped at Alphabet, particularly for AI, the company tempered expectations by sticking to—rather than raising—its spending guidance for the rest of the year.
Visa reported fiscal third-quarter adjusted earnings that matched expectations while revenue of $8.9 billion slightly missed. Payments volume rose by 7% in the period, while processed transactions increased 10%, down from 8% growth in overall payments volume in the second quarter and 11% growth in processed transactions. Shares of the credit-card company fell 4%.
Enphase Energy’s second-quarter adjusted earnings missed estimates and revenue of $304 million also came up shy of forecasts. Shares of Enphase, which makes microinverter systems for solar panels, rose 13% as the company said it expects third-quarter revenue of between $370 million and $410 million, compared with estimates of $404 million.
AMC Entertainment declined 7.7% after the movie-theater chain issued second-quarter guidance that called for a loss of 10 cents a share, a swing from year-earlier earnings of 6 cents. AMC forecast that revenue would decline to about $1.03 billion from $1.35 billion. In a statement, CEO Adam Aron said the “prolonged actors and writers strikes of 2023 severely reduced the number of movies being released theatrically in the early months of 2024.”
Market News
IBM Reports Boost in AI Bookings, Better-Than-Expected Revenue
IBM reported a jump in bookings for its artificial intelligence business as customers work to implement the latest technology.
Bookings for AI consulting and software have exceeded $2 billion since mid-2023, the company said Wednesday in a statement. That is double the $1 billion book-of-business IBM disclosed during its last quarterly earnings report in April.
About three-fourths of the AI bookings are made up of consulting, with the rest from software, Chief Executive Officer Arvind Krishna said in an interview. Over time, the revenue share from software is likely to increase, he added.
Ford Profit Disappoints, Stock Falls 12% as Quality Issues Dog Automaker
Ford Motor reported a dip in second-quarter adjusted profit on Wednesday as the automaker continues to battle costly quality issues and an EV business that is weighing on its bottom line, sending shares tumbling 12% in after-hours trading.
The Detroit automaker earned an adjusted profit of 47 cents per share, significantly missing analysts' expectations of 68 cents, according to LSEG data.
Nvidia Supplier SK Hynix's Q2 Profit Soars on AI Boom
South Korea's SK Hynix posted on Thursday its highest quarterly profit since 2018 as the Nvidia supplier sees explosive sales of its advanced DRAM chips such as high bandwidth memory (HBM) used in generative AI chipsets.
SK Hynix is benefiting the most among memory chip peers from AI-driven appetite for high-end chips such as HBM and solid-state drives (SSDs) following its early entry and large investments in the segments.
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