US Markets Worst Fall Since DEC 2022 - The Dow has dropped approximately 504 points, while the Nasdaq is on track for its most challenging day since 2022

On Wednesday, stocks declined following disappointing earnings reports from two major tech companies, which dampened investor confidence and set the Nasdaq Composite on course for its worst day since December 2022.

The tech-heavy Nasdaq fell 3.65%, while the S&P 500 slipped 2.32%. The Dow Jones Industrial Average also decreased by 504 points, or 1.25%.

Alphabet, the parent company of Google, saw its shares drop 5% despite beating expectations on both revenue and profit. However, YouTube advertising revenue fell short of consensus estimates. Tesla shares plunged 12.5% due to weaker-than-expected results and a 7% year-over-year decline in auto revenue.

Other major tech stocks, including Nvidia and Meta Platforms, each declined by 5%, while Microsoft fell 4%, reflecting market concerns following Alphabet and Tesla's reports.

These earnings reports are closely watched on Wall Street, as these large-cap companies have been pivotal in driving this year's market gains.

"There is potential for a shift in market sentiment, particularly if these 'magnificent seven' tech giants continue to disappoint," noted Strategas strategist Ryan Grabinski. "The upcoming weeks will be crucial in determining investor sentiment."

Meanwhile, there was a notable shift towards small-cap stocks, with the Russell 2000 index down 0.6% for the day but showing a strong 9% gain for the month. In contrast, the Dow was up 2% for the month, the S&P 500 remained unchanged, and the Nasdaq was down over 1% on a monthly basis.

Despite the setbacks from these tech giants, the overall earnings season has started positively, with more than a quarter of S&P 500 companies reporting second-quarter earnings, of which roughly 80% have exceeded expectations, according to FactSet data.

Investor concerns were further exacerbated by weaker-than-expected U.S. manufacturing data, as the U.S. PMI flash manufacturing output index unexpectedly contracted to 49.5 in July, below economists' expectations of 51.5, indicating declines in new orders, production, and inventories. Additionally, new home sales in June also fell short of economists' forecasts, adding to the cautious market sentiment on Wednesday.