Nasdaq slid into correction territory, leaving Wall Street in uncertainty. Meta Platforms may have initially reported stronger-than-expected quarterly results on Wednesday, but by the end of the extended trading session, a 4% gain had dwindled to just 2.6%. Despite its robust quarterly performance catching the attention of traders and analysts, the after-hours bounce couldn't compensate for the 4% decline during regular trading hours.
The lukewarm reception of Meta's quarterly results, in stark contrast to Netflix's 12% surge the previous week, marked the most significant move on Wall Street in the past month. The megatechs' inability to bolster the market contributed to this decline as Nasdaq slowly faltered.
The situation may change with Amazon's upcoming earnings report, although traders are skeptical given Amazon shares' 5.6% drop on Wednesday. Apple's quarterly report, scheduled for a week from now, also awaits, though its shares have already dipped.
Even though Microsoft shares rose on Wednesday following better-than-expected performance in its key cloud computing businesses, it wasn't sufficient to stem the tide. Consequently, Nasdaq plunged into its 70th correction territory in history on Wednesday as long-term Treasury yields surged, raising borrowing costs and nearing 5% for the third time in a week.
Nasdaq had surged 39% in the first half of the year, partly fueled by hopes that a weakening economy would deter the Federal Reserve from raising rates to combat inflation. However, the U.S. economy has proven to be much stronger than anticipated, as indicated by robust job and retail sales data. The Fed's messaging has shifted accordingly, suggesting that interest rates could remain higher well into 2024 and possibly beyond.
On Wednesday, Nasdaq fell 2.4%, closing below the 12,922.216 threshold, marking a decline of at least 10% from its previous peak in mid-July at 14,358.02—an actual drop of 10.7%. This reduced the year-to-date surge from 39% to just over 22%.
Investors noted that major tech companies like Netflix, Meta, Alphabet, and Microsoft benefited from substantial job cuts in late 2022 and earlier this year, along with price hikes (especially for Netflix). However, there are few signs of significant organic growth.
Alphabet's 9.5% slide on Wednesday served as a stark reminder that the concept of a "Magnificent Seven" tech companies supporting stock prices and confidence is no longer a reality for investors.
At the moment, it's every investor for themselves, and bond yields of around 5% for 2 and 10-year securities appear appealing.