Tech Stocks Swoon as Tesla Gets Hit Before Results: Markets Wrap
(Bloomberg) — A slide in technology heavyweights dragged down stocks amid concerns the market has run too far despite a generally solid earnings season. Gold’s losses deepened.
Following a torrid S&P 500 rally from its April lows, calls for a consolidation have emerged with the market vulnerable to any bit of negative news. A lackluster outlook from Texas Instruments Inc. and a slump in Netflix Inc. after in-line results added to investor caution. Tesla Inc. – which will be the first megacap to report — fell after more than doubling in the past 12 months.
“With equities hovering near record highs and valuations stretched, investors are looking for exceptional fundamentals to justify these lofty prices,” said Fiona Cincotta at City Index.
At a time when the equity rally has slowed, the flip side is that the proportion of US companies beating earnings expectations this quarter is the highest in more than four years. A majority of S&P 500 firms typically surpass expectations, but this season stands out considering that analysts had set the bar higher.
US companies should continue to deliver superior earnings growth supported by a robust AI investment cycle, ongoing deficit spending, and a still-resilient consumer, JPMorgan Chase & Co.’s Dubravko Lakos-Bujas says.
The S&P 500 fell to around 6,720. Gold slid 2.6% after suffering the worst rout in over 12 years on concerns its rally had run too far, too fast. The yield on 10-year Treasuries rose one basis point to 3.97%. Bitcoin fell 1.9%. The dollar wavered.
“So far, so good,” said Thomas Lee at Fundstrat Global Advisors, referring to the earnings season. “We continue to be constructive into year-end and expect the S&P 500 to reach at least 7,000 by year-end and that is the base case, with the possibility that we could see an even better 7,500.”
The companies’ financial results — and all the “confident” commentary — mark a turnaround from recent quarters when CEOs pulled their year-ahead forecasts and used their conference calls to highlight uncertainty around trade, tariffs and consumer behavior.
The strategy over the last 10 months or so has been to dampen investor expectations and hope lower financial estimates would be easier to reach or beat if any of their worst case economic scenarios came to fruition. Now, companies are reaping the benefits of that strategy with some stocks heading to record highs.
“Earnings are obviously a big focus right now, and there will be a lot of attention on Tesla’s report which come out after the close this evening,” said Matt Maley at Miller Tabak. “After getting a big boost in sales from the end of the tax credits, a lot of focus will turn to the robotaxi.”
Tesla is expected to post a 25% drop in third-quarter profits from a year ago when it reports earnings on Wednesday, according to data compiled by Bloomberg. Yet hope for the future while discounting the present has taken Tesla’s market valuation to dizzying heights. The shares trade at a whopping 195 times expected earnings over the next 12 months, up from less then 80 times in April.
The company’s valuation is head and shoulders above its peers in the Magnificent Seven: Alphabet Inc., Amazon.com Inc., Apple Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp. The Bloomberg Magnificent Seven Index trades for roughly 33 times expected earnings. After Tesla, the next highest valuation in the group belongs to Apple at just over 32 times.
With the season now well underway, results are looking promising, according to Oppenheimer Asset Management Chief Investment Strategist John Stoltzfus.
The fact that big US companies are beating expectations and guidance despite ongoing risks suggests there is “enough resilience to provide stocks with a ticket to ride,” Stoltzfus said this week.
As we venture deeper into the third-quarter reporting season, with the busiest weeks for earnings this week and next, the S&P 500 is exiting the peak of the buyback blackout window, noted Ryan Grabinski at Strategas.
“There’s certainly a wall of worry to climb,” he said. “However, all else equal, the corporate bid reasserting itself over the coming weeks should be a tailwind for risk more broadly.”
Beyond corporate earnings, though, US-based traders are focused on a few “good news” narratives that have also supported the positivity about risk assets and US stocks, according to Thierry Wizman at Macquarie Group.
“These ‘good news’ themes are: (1) that the Fed will ease again on October 29, and continue to signal more easing despite ‘sticky’ US inflation; and (2) that the US-China negotiations will lead to a reconciliation that prevents even higher tariffs between the two countries,” he said.
It’s now been two weeks since the S&P 500’s last record high, and while the S&P 500 has seen just marginal declines, some of the moves within sectors have been much larger, noted Bespoke Investment Group strategists.
In a defensive push, real-estate and consumer staples have rallied. Commodity-related sectors, financial and tech shares have lagged behind.
Bank of America Corp. clients returned to selling US equities last week after buying the dip the week prior, according to strategist Jill Carey Hall.
Institutional clients led the selling, she said. Tech and financials stocks saw the biggest outflows. Despite sales of single shares, clients bought equity exchange-traded funds across styles/sizes.
“Despite the stock market’s deterioration in breadth, we view near-term consolidations or pullbacks as a healthy and necessary following the market’s strong five-month advance,” said Craig Johnson at Piper Sandler. “Macro tailwinds, including lower energy prices and bond yields, should continue to set up opportunities to “buy the dips” once support is confirmed.”
Corporate Highlights:
Beyond Meat Inc. soared once again in an echo of the meme-stock frenzies that periodically roil the market. Tesla Inc. is recalling thousands of recently built vehicles over an issue that can cause a sudden loss of battery power, increasing the risk of a crash. AT&T Inc. added more mobile phone and home internet subscribers this summer than analysts expected, amid a heavy promotional push to keep competitive pressure on its two main rivals. Texas Instruments Inc., the biggest maker of analog chips, gave a lackluster forecast for the current period, adding to concerns that a semiconductor industry recovery is sputtering. Netflix Inc. said a tax dispute with Brazil cut into third-quarter earnings, marring results that otherwise fell in line with Wall Street estimates. Anthropic PBC is in discussions with Alphabet Inc.’s Google about a deal that would provide the artificial intelligence company with additional computing power valued in the high tens of billions of dollars, according to people familiar with the matter. Western Alliance Bancorp’s third-quarter profit rose more than 27% from a year earlier, topping most Wall Street projections and reassuring investors that an alleged fraud tied to a commercial real estate investor group didn’t impair the bank’s overall health. The stock rose in extended trading. Capital One Financial Corp. reported a surge in third-quarter profit, beating Wall Street estimates, and the lender announced plans to repurchase as much as $16 billion of stock in the wake of its acquisition of Discover Financial Services. Lyft Inc. is piloting a program that offers some customers cash back on future rides, the latest effort to win over users from rival Uber Technologies Inc. Uber Technologies Inc. and Nebius Group NV are committing as much as $375 million to develop Avride, the Dutch cloud infrastructure company’s autonomous vehicle subsidiary. GE Vernova Inc. expects an increasing amount of its gas turbines to be snapped up by big tech firms building data centers. Hilton Worldwide Holdings Inc. boosted the lower-end of its full-year outlook for expanding its hotel network. Barclays Plc has conducted a review of its entire loan portfolio after the British lender was stung by the chaotic collapse of Tricolor Holdings. Aberdeen Group Plc reported another quarter of net outflows as ongoing exits in its asset management unit offset a positive period for its Interactive Investor business. Hermès International SCA extended its run as the luxury industry’s strongest performer with another quarterly sales jump, even though the Birkin and Kelly bags maker’s key leather unit fell slightly short of expectations. Reckitt Benckiser Group Plc sales rose more than expected as the London-based consumer goods company reported strong growth in the region that includes China. How often do you look at prediction markets to inform your trading decisions? Let us know in the latest Markets Pulse survey.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2% as of 11 a.m. New York time The Nasdaq 100 fell 0.5% The Dow Jones Industrial Average fell 0.2% The Stoxx Europe 600 was little changed The MSCI World Index fell 0.2% Bloomberg Magnificent 7 Total Return Index fell 0.1% The Russell 2000 Index fell 1.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1611 The British pound fell 0.1% to $1.3355 The Japanese yen was little changed at 151.87 per dollar Cryptocurrencies
Bitcoin fell 1.9% to $108,765.17 Ether fell 3% to $3,837.08 Bonds
The yield on 10-year Treasuries advanced one basis point to 3.97% Germany’s 10-year yield advanced two basis points to 2.57% Britain’s 10-year yield declined five basis points to 4.42% The yield on 2-year Treasuries was little changed at 3.46% The yield on 30-year Treasuries advanced one basis point to 4.56% Commodities
West Texas Intermediate crude rose 2.4% to $58.63 a barrel Spot gold fell 2.6% to $4,016.49 an ounce ©2025 Bloomberg L.P.
