Nasdaq falls into correction territory as markets slip on disappointing tech earnings

US stocks fell on Thursday under the pressure of disappointing third-quarter results from Big Tech companies and high Treasury yields.

The Dow fell about 252 points, or 0.8%, and the S&P dropped 1.2%. The tech-heavy Nasdaq Composite, meanwhile, sank another 1.8%.

Thursday’s drop comes after the S&P 500 fell to its lowest levels since May on Wednesday and the Nasdaq notched its worst day since February, closing down 2.4%.

Shares of Meta slid about 3.7% on Thursday after the Facebook parent company reported that advertising revenue had been soft this quarter. While Meta beat expectations and posted significant year-over-year quarterly revenue gains of 23%, Wall Street worried about its Reality Labs division, which lost $3.7 billion.

Shares of Google-parent Alphabet also slid on Wednesday, falling by 9.5% after the company also reported an earnings beat on Tuesday but fell short in its cloud business. It’s the largest decline for the stock since March 2020. Shares fell another 2.7% on Thursday morning.

Shares of other big tech companies slid alongside Meta and Alphabet. Apple fell by 2.5%. Amazon, which reported strong results Thursday afternoon, was down 1.5%.

Microsoft shares also fell on Thursday by 3.8%. Microsoft posted revenue of $56.5 billion on Tuesday, representing 13% year-over-year sales growth, also beating expectations. Microsoft’s quarterly profits hit $22.3 billion, up 27% from the year-ago period.

The top tech companies in the US — Apple, Amazon, Nvidia, Microsoft and Alphabet — combine to make up a quarter of the S&P 500’s value, giving them an outsized impact on investors’ portfolios.

The Nasdaq is now in correction territory, down more than 10% since its most recent high in July. The S&P 500, meanwhile, is flirting with correction territory and down nearly 10% from its intraday high, also reached in July.

Tech stocks have also felt the impact of rising Treasury yields. The 10-year yield hovered near a key 5% threshold on Thursday morning before retreating to 4.85% in the afternoon as investors digested a report that shows the US economy expanded at a remarkably strong pace in the third quarter, despite interest rates at their highest level in 22 years.

Gross domestic product, a measure of all goods and services produced in the economy, grew at an annualized 4.9% rate in the third quarter, the Commerce Department reported Thursday. GDP is adjusted for inflation and seasonal swings.
That’s well above the second quarter’s 2.1% pace and faster than economists’ expectations of a 4.3% rate.

In other economic news, mortgage rates continued to climb this week amid a stronger-than-expected economy.

The 30-year fixed-rate mortgage averaged 7.79% in the week ending October 26, up from 7.63% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 7.08%.

US pending home sales, however, ticked up higher in September despite the increase in rates.