Stocks fell globally on Wednesday as disappointing earnings from Tesla and European luxury brands weighed on the market. Meanwhile, oil prices increased after trading near six-week lows due to concerns over weak global demand.
The U.S. dollar dipped slightly, with traders anticipating an inflation reading on Friday and a Federal Reserve meeting next week. The yen, however, climbed to a seven-week high ahead of its central bank meeting.
“The big story is the earnings front, with Tesla probably being the most disappointing,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions in Boston.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.7%, while Japan’s Nikkei fell 1%.
On Wall Street, all three main indexes closed lower, led by declines in technology, consumer discretionary, and communication services stocks. Tesla’s shares dropped 12.3% after reporting its lowest profit margin in five years due to waning demand for electric vehicles. Other “Magnificent Seven” stocks, including Nvidia, Alphabet, Amazon, and Microsoft, fell between 2.8% and 6.8%.
The Dow Jones Industrial Average fell 1.25% to 39,853.87, the S&P 500 lost 2.31% to 5,427.13, and the Nasdaq Composite dropped 3.64% to 17,342.41.
The pan-European STOXX 600 index fell 0.61% to 512.30 points, with LVMH reporting slower sales growth as Chinese shoppers cut back on spending.
“It’s the curse of high expectations, especially for the tech companies that have been the market’s darlings,” said James St. Aubin, chief investment officer at Sierra Mutual Funds in Santa Monica, California.
Subdued global stock trading reflected markets searching for direction, with traders digesting themes like the U.S. election, rate cut expectations, and weak corporate earnings reports.
Oil prices rose due to falling U.S. crude inventories and supply risks from Canadian wildfires but remained near month-and-a-half lows amid tepid demand. Brent crude futures closed 0.9% higher at $81.71 a barrel, while U.S. West Texas Intermediate crude rose 0.8% to $77.59 per barrel.
Upcoming U.S. GDP data on Thursday and personal consumption expenditure data on Friday could help investors gauge when interest rates might be cut. Markets are pricing in 62 basis points of easing this year, with a September cut priced in at 95%, according to the CME FedWatch tool. The benchmark U.S. 10-year Treasury yield fell for a second straight session, rising 4.9 basis points to 4.288%.
“The rotation is in full force. Magnificent 7 earnings growth is decelerating, while the rest are accelerating,” said Thomas Hayes, chairman at Great Hill Capital in New York. “A Fed cut will fuel this new trend for cyclicals, small caps, and dividend stocks.”
Gold prices slipped after early gains, with spot gold losing 0.45% to $2,398.45 an ounce, while U.S. gold futures settled 0.3% higher at $2,415.70.
The Japanese yen strengthened 1.06% against the dollar to 153.97 per dollar. Bitcoin gained 0.01% to $65,848.00 in cryptocurrencies, while Ethereum declined 3.18% to $3,372.50.