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The stock market took a tumultuous turn on Thursday, leaving investors puzzles as the S&P 500 and NASDAQ failed to regain the ground lost in previous sessions. The tech-triggered selloff led to a decline, with the Dow adding a mere 2/10 of a percent, the S&P losing half a percent, and the NASDAQ falling more than 9/10 of a percent. Despite being up for most of the session, driven by stronger than expected second quarter GDP data, mega cap stocks like Meta Platforms, Microsoft, and Nvidia succumbed to the pressure and ended the day lower. What's next for these indices, and how will the earnings reports shape the market's trajectory?
How did we get here? Lackluster earnings from both Tesla and Alphabet the previous day pummeled the Magnificent 7 stocks, leading the S&P and NASDAQ to log their worst day since 2022. Alphabet shares continued their slide on Thursday, falling 3% to the stock's lowest close since May 6th. However, Tesla managed to rebound by 2%. As we look ahead, more mega cap tech companies are set to report earnings next week. But what should we focus on? Brad Bernstein, managing director at UBS Private Wealth Management, believes that while these results are critical, the real excitement lies elsewhere.
So, what's the big story? For the first time in two years, we're going to witness earnings growth in the non-Magnificent 7 of the S&P 500. The 493 other stocks, which have collectively experienced no earnings growth over the last several years, are finally poised to show growth. This shift could be a positive sign for the rally to continue, as earnings are now expected to grow from other areas within the market.
Let's take a closer look at some of the companies that made headlines this week. IBM shares surged more than 4% after the tech company beat estimates for second quarter revenue and raised the annual growth forecast for its software business. American Airlines also saw a significant rise, with shares increasing by over 4% after the company announced a strategic reset of its sales and distribution strategy to attract corporate travelers. Meanwhile, Southwest Airlines climbed 5.5% after announcing the end of open seating on its flights.
On the flip side, Ford shares plummeted more than 18% after the automaker's second quarter adjusted profit missed estimates by a wide margin. This serves as a reminder that not all companies are on the same path to recovery.
As we navigate through these volatile times, the market's fate hangs in the balance. Will the earnings growth in the non-Magnificent 7 stocks propel the rally forward, or will the tech giants' earnings reports dictate the next move? Only time will tell, but one thing is certain: the stock market continues to be a rollercoaster ride, offering both challenges and opportunities for investors.
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