Tesla and Netflix drive slump to put end to mega-tech rally
Tesla CEO Elon Musk saw shares in the electric car giant fall as much as 9%.
US shares fell as a round of disappointing tech earnings led by Netflix and Tesla ended hopes for a continuing rally.
The tech-heavy Nasdaq 100 index fell 1.5%, with Netflix set for its biggest decline of the year after issuing a disappointing revenue forecast.
Tesla shares slid after profitability shrank in the second quarter, a sign the electric-vehicle maker’s margins are being squeezed, while new jobless data prompted traders to price in higher odds of a quarter-point rate hike beyond the US Federal Reserve’s meeting next week. Shares on both Netflix and Tesla fell by as much as 9% at one stage.
The losses are hitting the pause button on this year’s blistering stock rally that has seen the S&P 500 rise 19%, and the Nasdaq 100 gain 43%, against a shaky economic outlook during the Fed’s aggressive tightening campaign.
“In the last 24 hours alone there has been talk of a worsening of the conflict in Ukraine, a further slowdown in China, and major US banks facing significant real estate losses,” Lewis Grant, senior portfolio manager at Federated Hermes, wrote in a research note.
Aegon Asset Management strategist Cameron McCrimmon warned that "the breadth of returns on the S&P 500 has become increasingly narrow, driven by a few mega-cap tech stocks on AI optimism, which is a classic sign of an ageing bull”.
The sentiment was echoed by Louise Goudy Willmering, a partner at Crewe Advisors.
“To be just driven simply by a few names in technology is not great,” Ms Goudy Willmering said.
“Earnings will definitely determine where we go from here as we look into the third and fourth quarters,” she said.
In Europe, tech stocks including ASML slumped after Taiwan Semiconductor Manufacturing cut its outlook despite the boom in AI development.
- Bloomberg
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