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Tag: GOOG

  • The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

    The ‘narrow breadth’ chorus has fallen silent. What broadening participation in stock-market rally means for investors.

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    A wider swath of stocks have joined the S&P 500
    SPX,
    +0.15%
    ’s
    upswing after the so-called Magnificent Seven — Apple
    AAPL,
    +0.32%
    ,
    Amazon
    AMZN,
    +1.11%
    ,
    Alphabet
    GOOG,
    +0.08%
    ,
    Microsoft
    MSFT,
    -0.72%
    ,
    Meta
    META,
    -2.11%
    ,
    Nvidia
    NVDA,
    -0.04%

    and Tesla
    TSLA,
    +0.37%

    — single-handedly propelled the large-cap index into a bull market in early June, with the gauge now up more than 28% from its low notched last October and rising to new highs since April 2022, according to Dow Jones Market Data. 

    Hopes that the U.S. economy could pull off a soft landing and avoid a recession despite the Federal Reserve’s aggressive interest-rate hikes, as well as receding inflation pressures and expectations for the end of the Fed’s monetary tightening campaign, have underpinned a notable expansion in market breadth over the past two months, according Adam Turnquist, chief technical strategist at LPL Financial. 

    The S&P 500 Equal Weighted Index
    SP500EW,
    +0.27%
    ,
    which lagged behind the market-cap-weighted S&P 500 index for most of the year, has now kicked back into gear and staged an impressive comeback in July. The equal-weighted index and the S&P 500 each advanced 3.1% this month, according to FactSet data. 

    The equal weighting eliminates the distortion of the megacap components and significantly changes several sector weightings in the S&P 500, including technology, which drops from around 29% on the SPX to only 13% on the equal-weighted index, said Turnquist in a Friday note. Meanwhile, the industrials sector has the biggest increase in weight, jumping from 9% on the SPX to 16% on the equal-weighted index.

    Another way to quantify and compare market breadth is to look at the percentage of stocks on an index trading above their longer-term 200-day moving average (dma), Turnquist said. In general, if a stock is trading above its 200 dma, it is considered to be in an uptrend, and if the price is below the 200 dma, it is considered in a downtrend. Furthermore, a higher percentage of stocks above their 200 dma implies buying pressure is more widespread — suggesting the market’s advance is likely sustainable.

    The chart below shows that 73% of stocks within the S&P 500 are trading above their 200 dma as of July 27, which compares to only 48% at the end of 2022. Moreover, the composition of breadth leadership has turned increasingly bullish. The highest sector readings include technology, industrials, energy, and consumer discretionary.

    “So not only is breadth on the index robust, but cyclical stocks are also leading,” said Turnquist. 

    SOURCE: LPL RESEARCH, BLOOMBERG

    Wall Street often views broadening participation in the stock-market rally as a measure of health and a constructive sign of the sustainability of the bull market. 

    Jimmy Lee, founder and chief executive officer of The Wealth Consulting Group said he is seeing “a lot of money” flowing into areas that are not the Magnificent Seven such as stocks in the industrials, financials, materials, energy and even real-estate sectors.

    The S&P 500’s industrials sector
    SP500.20,
    +0.23%

    climbed 2.9% in July, while the financials sector
    SP500.40,
    +0.44%

    advanced over 4.7% this month. The S&P 500’s energy sector
    SP500.10,
    +2.00%
    ,
    which had been the biggest laggard when the rest of the markets exited the bear market in June, jumped 7.3% month to date after the U.S. oil benchmark
    CL.1,
    -0.20%

    CL00,
    -0.20%

    closed above $80 a barrel for the first time since April. 

    Meanwhile, the tech-heavy S&P 500’s communication-services sector
    SP500.50,
    -0.03%

    rose 6.7% in July, while the consumer-discretionary sector
    SP500.25,
    +0.56%

    gained 2.4% and the information-technology sector
    SP500.45,
    +0.13%

    was up 2.6%, according to FactSet data. 

    See: Stocks are on a seemingly unstoppable hot streak, but this bond-market ‘tipping point’ could see it end in a hurry

    Stephen Hoedt, managing director of equity and fixed income research at Key Private Bank, told MarketWatch in an interview that he doesn’t see “any reason to get bearish here with the fundamentals that are underlying,” which gives investors reason to rotate toward the more cyclical areas such as energy, financials and industrials, while broadening the market away from just being concentrated in the megacap technology names. 

    “The growth has been a surprise this year for everyone, so that’s what the market got wrong coming into this year. When I look at growth, nominal GDP growth translates directly into earnings and we’ve seen earnings continue to surprise on the upside,” Hoedt said. 

    Hoedt pointed to the direction of the 12-month forward earnings estimate for the S&P 500 as an important indicator. “As long as the direction of the 12-month forward earnings number for the S&P 500 is going up, it’s really, really difficult to be bearish on the stock market,” he said. “It seems to me that we may start to see another inflection higher in forward earnings revisions that take into account this stronger growth environment that we’re in.” 

    However, the broadening of the stock-market rally and the bullish sentiment were also driving some on Wall Street to believe stocks are overbought and due for a correction. 

    Lee said there’s still too much pessimism out there and too much concern that some investors haven’t chased the market yet. “In the second half of this year, when the Fed does stop raising rates and if the economy stays out of recession, you can see major money — trillions of dollars moving from the money market into equities and other risk assets,” he told MarketWatch in a phone interview on Friday.

    “When that happens, it’s probably going to push valuations even further. So I would imagine when that happens is when you can expect more of a correction to occur, but I think that we still have more room to go before that happens.” 

    U.S. stocks ended higher on Monday, finishing up July on a positive note. Three major stock indexes rallied this month, with the S&P 500 up 3.1% and booking its fifth monthly gain. The tech-heavy Nasdaq Composite
    COMP,
    +0.21%

    gained 4.1% month to date, while the Dow Jones Industrial Average
    DJIA,
    +0.28%

    advanced 3.4%, according to Dow Jones Market Data. 

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  • Digital advertising is Meta and Google’s world, and everyone else is coping with it

    Digital advertising is Meta and Google’s world, and everyone else is coping with it

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    There are two certainties in the tech world when it comes to digital advertising: Google and Meta. And then there’s everyone else.

    Through economic thick and thin, Google and Meta are the gold standards by virtue of broad reach (billions of people globally), product dominance (in search and social media, respectively) and in their positions in the lightning-fast AI race. This week’s earnings results for Alphabet Inc.
    GOOGL,
    +2.46%

    GOOG,
    +2.42%

    and Meta Platforms Inc.
    META,
    +4.42%

    proved that emphatically once again.

    Both companies rebounded from recent wobbly digital ads sales of their own through gigantic consumer reach and aggressive plans to parlay AI into ad sales. Google has developed (or dabbled) in some form of AI for at least seven years, and in a conference call with analysts Wednesday, Meta Chief Executive Mark Zuckerberg said his company will focus in the near term on AI to develop agents, ad features in existing products like Instagram and Reels, and internal productivity and efficiency. “We want to scale them, but they are hard to forecast,” he admitted.

    Read more: Meta’s stock jumps after AI, ad momentum drive earnings and revenue higher

    And: Alphabet earnings push stock up 6%, fueled by strong ad sales and strides in AI

    Conversely, for companies consigned to the also-ran category, such as Snap Inc.
    SNAP,
    +3.39%

    and X — the former Twitter — the news was bleak. Snap forecast disappointing third-quarter sales amid a spending push to draw advertisers.

    “We continue to believe it will take multiple quarters of improved execution for many investors to get more comfortable with the story longer term,” JP Morgan analysts said in a note on Snap earlier this month.

    Digital-advertising leader Google sought to remind everyone it has been doing AI a long time while Microsoft Corp.
    MSFT,
    +2.31%
    ,
    a major investor in ChatGPT pioneer OpenAI, tempered its approach, Josh Wetzel, chief revenue officer at OneSignal, said in an interview. “AI’s greatest immediate value may be for Facebook advertising,” he said, pointing to it as an efficient and effective tool after Facebook encountered issues with data-privacy changes Apple Inc.
    AAPL,
    +1.35%

    made to mobile devices.

    Read more: Alphabet earnings remind Wall Street of Google’s AI prowess

    “Meta’s solid quarter adds further evidence to the view that advertisers are choosing to spend their budget on the so-called market leaders, such as Facebook and Instagram, at the expense of the smaller social-media networks, like Snap,” said Jesse Cohen, senior analyst at Investing.com.

    Jon Oberlander, executive vice president of social at digital-marketing agency Tinuiti, added: “It is, to some extent, still Meta/Google’s game, especially for performance advertisers, as the ROI and scale advertisers can find in the mid-lower funnel gap above other platforms.”

    At the same time, Forrester analyst Kelsey Chickering said linear television ad revenue will slow between now and 2027 to about $65 billion from $70 billion as traditional TV continues to lose the under-25 crowd that has fled to streaming services and creator-heavy platforms like Snapchat and TikTok.

    Digital advertising is on track to grow in the high single digits, or more, in 2023, slightly ahead of June’s forecast estimates from GroupM and Magna of around 8% each, according to Brian Wieser, head of Madison and Wall, a media and advertising consultancy for investors.

    Most of that growth will benefit Google, Meta, and Microsoft’s LinkedIn, according to data from Emburse. Conversely, Emburse found ad spending on Twitter/X has plunged 54% from a year ago in May, before Elon Musk bought the company.

    “Google, Meta and LinkedIn are platforms where people go to consume information, search for ideas, or give context to what they experiencing in their personal or work lives,” Emburse Chief Experience Officer Johann Wrede said.

    While Alphabet CEO Sundar Pichai boasted Wednesday of “continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search” and other services, as well as improved YouTube ad sales, Meta’s addition of potential X-killer Threads could dramatically inflate its ad sales going forward.

    Zuckerberg sees potential in Threads long term despite a plunge in its user sign-ups because X is hemorrhaging advertising clients, and this week reportedly slashed ad costs to lure business customers.

    “The launch of Threads holds great promise for Meta. While there are currently no ads on the app, it’s inevitable that they will come and the ability to use data from other Meta properties for targeting is a highly lucrative proposition for brands,” Aaron Goldman, chief marketing officer at Mediaocean, said in an email.

    That translates to more near-term pain for smaller platforms such as Snap and X, which are posting negative growth, Michael Nathanson of SVB MoffettNathanson warned in a note Wednesday.

    “The truth is that Alphabet started integrating machine learning and artificial intelligence into their products and ad solutions close to a decade ago,” he said. Snap and others are scrambling to catch up.

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  • Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

    Alphabet earnings push stock up 6%; CFO Ruth Porat to become president, chief investment officer

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    Google parent Alphabet Inc.’s stock jumped 6% in after-hours trading Tuesday after the company beat estimates on the top and bottom line, and announced the transition of Chief Financial Officer Ruth Porat to president and chief investment officer in September.

    Fueled by strong advertising sales, Alphabet
    GOOGL,
    +0.56%

     
    GOOG,
    +0.75%

    racked up fiscal second-quarter net income of $18.4 billion, or $1.44 a share, compared with net income of $16 billion, or $1.21 a share, in the same quarter a year ago.

    Total revenue was $74.6 billion, compared with $69.7 billion a year ago. Sales minus traffic-acquisition costs were $62.06 billion, vs. $57.5 billion last year.

    Analysts surveyed by FactSet had expected on average net earnings of $1.34 a share on revenue of $72.85 billion and ex-TAC revenue of $60.25 billion.

    “There’s exciting momentum across our products and the company, which drove strong results this quarter,” Alphabet Chief Executive Sundar Pichai said in a statement. “Our continued leadership in AI and our excellence in engineering
    and innovation are driving the next evolution of Search, and improving all our services.”

    During a conference call Tuesday afternoon, he highlighted the intertwining of advertising and Alphabet’s strides in generative AI. He added the company continues to consolidate and align operations to streamline spending.

    Shares of Alphabet have advanced 39% so far this year largely on the strength of generative AI and its potential. The broader S&P 500 index 
    SPX,
    +0.28%

    is up 19%. Alphabet’s stock inched up 0.6% to $122.21 in the regular session Tuesday.

    Google’s total advertising sales improved to $58.14 billion from $56.3 billion a year ago, and edged analysts’ average expectations of $57.45 billion. Google Cloud hauled in $8 billion, compared with $6.3 billion last year. YouTube ad sales rebounded to $7.7 billion from $7.34 billion a year ago.

    “The proverbial floodgates aren’t opening yet but clients are starting to see pockets of opportunity and are willing to invest for a direct return,” Aaron Levy, vice president of paid search at Tinuiti, said in an email.

    Porat, who has played an essential role in Google’s advertising success since she became CFO in 2015, will start her new role on Sept. 1. She will be responsible for Alphabet’s investments in its Other Bets portfolio, and the company’s investments in countries and communities around the world. Porat will continue to report to Pichai.

    “We see technology can make so much of a difference in people’s lives… and in economic growth globally,” Porat said during the conference call late Tuesday.

    The monetization of AI continues to be an obsession of investors and Wall Street. Microsoft Corp.’s
    MSFT,
    +1.70%

    AI version, Bing, hit the market first, but Google’s competing entry, Bard, is making headway, according to analysts. Alphabet is ramping up AI initiatives to improve operational efficiency and productivity.

    When asked on the call about AI monetization, Pichai said the technology expands the company’s total addressable market, brings in potential new customers, deepens the versatility of its product portfolio, and differentiates core products such as cybersecurity.

    AI’s importance was underscored by a Wall Street Journal report on Tuesday that Google co-founder Sergey Brin has been spotted at the company’s Mountain View, Calif., headquarters in recent weeks working with AI researchers on a large-scale project. Brin has been largely out of sight after stepping down from an executive role at parent company Alphabet in 2019.

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  • Dow posts longest winning streak in nearly 6 years; Nasdaq slumps over 2%

    Dow posts longest winning streak in nearly 6 years; Nasdaq slumps over 2%

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    U.S. stocks finished mostly lower Thursday, with the Nasdaq and S&P 500 dragged down by disappointing earnings, while the Dow Jones Industrial Average rose for a ninth straight day for its longest winning streak in nearly six years.

    How stocks traded

    • The S&P 500
      SPX,
      -0.68%

      fell 30.85 points, or 0.7%, to close at 4,534.87.

    • The Dow
      DJIA,
      +0.47%

      rose 163.97 points, or 0.5%, to finish at 35,225.18. The winning streak is its longest since a nine-day run that ended on Sept. 20, 2017, according to Dow Jones Market Data.

    • The Nasdaq Composite
      COMP,
      -2.05%

      ended at 14,063.31, down 294.71 points, or 2.1%.

    What drove markets

    After lagging behind the S&P 500 and Nasdaq for most of the year, the Dow Jones Industrial Average has climbed over the past two weeks. The blue-chip gauge is now heading for its longest streak of daily gains since Sept. 20, 2017, according to Dow Jones Market Data.

    It’s the latest milestone as value stocks and other lagging sectors of the market appear to be playing “catch up,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, during a phone interview with MarketWatch. Although the Dow’s year-to-date gains are still well behind those of the S&P 500, with the blue-chip gauge up 6.6% since Jan. 1, FactSet data show.

    On Wednesday, the S&P 500 and Nasdaq closed at their highest levels in nearly 16 months.

    “We’re finally seeing the rotation to value,” he said. “The Dow is playing catch up with the S&P 500 and the Nasdaq.”

    See: Stock-market bubble trouble? Check out the 3-year view on Nasdaq, S&P 500 returns.

    Technology stocks were lagging following earnings from Netflix Inc.
    NFLX,
    -8.41%

    released late Wednesday, which showed that revenue fell short. Shares fell 8.4%.

    Tesla Inc.
    TSLA,
    -9.74%

    shares fell 9.7% after the electric vehicle maker beat Wall Street expectations for its second quarter but not in the blowout fashion that some market observers were expecting.

    “Netflix missed sales estimates and issued lower-than-expected Q3 guidance, while Tesla’s results showed shrinking profitability with squeeze on margins,” said Henry Allen, strategist at Deutsche Bank.

    Semiconductor shares also took it on the chin, with the PHLX Semiconductor Index
    SOX,
    -3.62%

    falling 3.6%. The drop came after Taiwan Semiconductor Manufacturing Co. 
    TSM,
    -5.05%

    topped second-quarter earnings expectations but reported margins that contracted, while providing a somewhat downbeat outlook.

    Meanwhile, shares of IBM Corp.
    IBM,
    +2.14%

    and Johnson & Johnson
    JNJ,
    +6.07%

    drove the Dow higher after both companies beat earnings expectations.

    Bad news for Netflix seemed to infect other megacap technology names, as Alphabet Inc. Class A
    GOOGL,
    -2.32%

    and Alphabet Inc.
    GOOG,
    -2.65%

    retreated, as did shares of Apple Inc.
    AAPL,
    -1.01%

    and Microsoft Corp.
    MSFT,
    -2.31%

    after the latter hit a record this week.

    Investors also digested earnings from American Airlines Group Inc.
    AAL,
    -6.24%

    and Blackstone Inc.
    BX,
    -0.61%

    which reported before the opening bell. After the close, investors will hear from Capital One Financial Corp.
    COF,
    -2.52%
    ,
    CSX Corp.
    CSX,
    -0.27%

    and First Financial Bancorp
    FFBC,
    -0.54%
    ,
    along with a few others.

    In U.S. economic data, weekly jobless benefit claims data showed the number of Americans applying for first-time unemployment benefits fell to a two-month low. Meanwhile, the Philadelphia Fed’s gauge of manufacturing activity came in at negative 13.5 in July, up from 13.7 during the prior month.

    Existing home sales fell in June, while leading index of economic indicators dropped 0.7% in June, falling for the 15th month in a row.

    Companies in focus

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  • Nasdaq is making a big change to its most popular index. Here’s how it might impact your portfolio.

    Nasdaq is making a big change to its most popular index. Here’s how it might impact your portfolio.

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    Big Tech has gotten too big for Nasdaq’s liking.

    So the exchange has decided to make some changes to the Nasdaq 100 index, its most popular index, according to company representatives, ostensibly to diminish the concentration risk that accompanies having an index that derives more than half of its value from just seven companies.

    Nasdaq announced late last week that the Nasdaq 100
    NDX,
    +1.24%

    will undergo a special rebalancing that will take effect prior to the market open on July 24. It’s only the third time that Nasdaq has announced such an impromptu rejiggering of how much individual stocks contribute to the index. Although Nasdaq can also reconstitute the index regularly every December, and there’s also a mechanism to rebalance every quarter as well.

    In a statement announcing the move, the exchange alluded to the fact that the largest companies in the technology sector have too much sway over the index’s price. Nasdaq said special rebalancing can be implemented “to address overconcentration in the index by redistributing the weights.”

    The rebalancing comes at a critical time. The Nasdaq 100 has risen 40% since the start of 2023, largely thanks to the “Magnificent Seven,” a handful of megacap technology names that have powered much of the U.S. stock market’s rally this year.

    These gains have pushed the index to its highest level since mid-January 2022, meaning that Big Tech has now retraced nearly all of last year’s losses, and might soon be headed for the all-time highs from November 2021.

    As of Thursday, the Magnificent Seven stocks — Nvidia Corp.
    NVDA,
    +3.53%
    ,
    Apple Inc.
    AAPL,
    +0.90%
    ,
    Microsoft Corp.
    MSFT,
    +1.42%
    ,
    Amazon.com Inc.
    AMZN,
    +1.57%
    ,
    Tesla Inc.
    TSLA,
    +0.82%
    ,
    Meta Platforms Inc.
    META,
    +3.70%

    and Alphabet Inc.’s Class A
    GOOGL,
    +1.53%

    and Class C
    GOOG,
    +1.62%

    shares — accounted for 55% of the Nasdaq 100’s market capitalization, while the top five names account for more than 45%.

    According to Nasdaq’s official methodology, the goal is to keep the aggregate weighting of the biggest stocks below 40%. In fact, it’s possible that Tesla Inc. surpassing 4.5% of the index earlier this month triggered the Nasdaq’s rebalancing announcement, according to analysts from UBS Group AG
    UBS,
    +1.87%
    .

    Exactly how it plans to accomplish this isn’t yet known. Nasdaq said the new weighting scheme will be unveiled on Friday, likely after the U.S. market close. But the UBS team has an educated guess.

    “The quarterly reviews would dictate that the aggregate weight to securities exceeding 4.5% be set to 40%. If that’s the approach Nasdaq takes, then we’d expect the weights of Microsoft, Apple, Nvidia, Alphabet, Amazon, and Tesla to be reduced,” the team said in a note shared with MarketWatch.

    For investors trying to anticipate how this might impact their portfolios, here the answers to a few key questions.

    Could the rebalancing kill the U.S. stock market rally?

    Not likely. Or rather: if the rally in Big Tech does falter, history suggests it won’t be because of the rebalancing.

    Here’s more on that from Nicholas Colas, co-founder of DataTrek Research, who discussed the topic in commentary emailed to MarketWatch on Wednesday.

    “…[T]here is the natural inclination to think that the upcoming special reweighting is a sign that large cap disruptive tech is set to roll over because a handful of names have so handily outpaced the rest of its notional peers,” Colas said.

    “History suggests otherwise. The last 2 one-off reweights were in 2011 and 1998. Neither proved to be the end of a Nasdaq 100/tech stock bull market. Not even close, really.”

    More immediately, ETF experts expect trading around the rebalancing will be relatively muted.

    “While it sounds scary, Investors are well positioned — this has been well bantered about,” said David Lutz, head of ETF Trading at Jones Trading, in comments emailed to MarketWatch.

    How could this benefit investors?

    Since megacap technology stocks don’t pay much, if anything, in dividends, the rebalancing could increase the amount of dividends that ETF investors receive each year, according to a team of analysts at JPMorgan Chase & Co.

    Since the largest constituents pay a dividend yield well below the index average, the redistribution of weight from them to the rest of the index will result in a “meaningful boost” to the regular payouts received by investors, which will boost the total return of Nasdaq 100-tracking ETFs and mutual funds.

    Will there be any short-term costs associated with the rebalancing?

    There might be. Since the new index weightings will be announced in advance, investors will have plenty of time to front-run the rebalancing trade.

    Still, there are plenty of hedge funds and proprietary trading firms that run strategies explicitly designed to profit from rebalancing. These firms profits have to come from somewhere, and the logical place would be the fund managers of the Invesco QQQ exchange-traded fund
    QQQ,
    +1.26%

    QQQM,
    +1.27%
    .

    “There are prop traders and hedge funds that run the strategy of providing liquidity to indexes with the expectation that they’ll earn profits,” said Roni Israelov, president and CIO at Wealth Manager NDVR, during a phone interview with MarketWatch.

    “if they are earning profits by providing that liquidity, the expectation is those profits are being paid by investors in those funds.”

    So far at least, markets appear to have taken news of the rebalancing in stride. Megacap technology names tumbled earlier this week, but they’ve since recouped those losses and then some.

    The Nasdaq Composite
    COMP,
    +1.15%
    ,
    another Nasdaq index that isn’t quite as heavily weighted toward Big Tech, rose 1.2% to 13,918.96.

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  • Driverless cars are driving San Francisco crazy — ‘They are not ready for prime time’

    Driverless cars are driving San Francisco crazy — ‘They are not ready for prime time’

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    A street was blocked for road work in my San Francisco neighborhood this month, with a worker holding a large STOP sign to direct traffic.

    A white car did as instructed, stopping in the middle of the intersection and blocking traffic at the four way intersection. No one was in the driver’s seat and there were no passengers, nor any training drivers — it was a Cruise driverless car, one of many that have flooded streets in the city in the last two years.

    The public works employee holding the sign was flummoxed as how to get the car to move away. After several minutes, the car slowly backed its way out and crossed the street, but ended up on the wrong side. After another 10 minutes, it managed to pull itself together, get in the right lane and drive down the hill.

    Most San Francisco residents can tell a similar story. The growing driverless car fleets in San Francisco are both a fascinating glimpse of science fiction come to life and a scary example of how Big Tech and auto companies have run roughshod over a congested city, with technology that really isn’t ready yet and little regulation to keep it at bay.

    Now, the problem is coming to a head. San Francisco public officials have had enough, and are speaking out about safety threats ahead of a hearing next month that could let companies expand into larger fleets of fare-generating robotaxis.

    “They are not ready for prime time,” San Francisco Fire Chief Jeanine Nicholson told MarketWatch in an interview.

    “They have run over our hoses, they have blocked our fire engines from going on calls, they have just blocked our vehicles from getting down streets where there is a possible fire. They have just done a multitude of things. We had to break the window of one once because we could not get its attention,” Nicholson said.

    While the average citizen can laugh at the stalled cars in city streets, the vehicles represent a major impediment for first responders. The San Francisco fire chief believes they put the city’s firefighters and residents at risk.

    “Response time matters — a fire can double in size in a minute,” she said.

    Aaron Peskin, president of the city’s Board of Supervisors, said there have been 66 incidents in which driverless cars interfered with first responders this year. But the city has little control over the cars operated by Cruise, a unit of General Motors Co.
    GM,
    +1.04%
    ,
    and Waymo LLC, a subsidiary of Google parent Alphabet Inc.
    GOOG,
    -0.34%

    GOOGL,
    +0.17%

    Both companies already have Department of Motor Vehicle permits to deploy a driverless passenger taxi service, a process Peskin described as “Kafka-esque.”

    “You have this thing where the DMV colluded with the industry to redact information that otherwise was public,” he said, referring to the result of a lawsuit Waymo filed last year against the DMV to keep its crash data private, arguing that it held trade secrets. “The funny thing is it’s not like San Francisco is trying to say ‘let’s put the genie back in the bottle.’ We are trying to ensure that our streets are safe. They have become too congested.”

    Both companies are seeking to expand their operations into fare-generating robotaxis in San Francisco, leading to a crucial meeting of California’s Public Utility Commission now slated for July. Waymo is seeking to begin passenger robo-taxi service in the city, while Cruise is seeking to expand its passenger robo-taxi service to the entire city, 24 hours a day, and remove exclusions of steep hills and roundabouts, deploying 100 vehicles. Helpfully for the companies, one PUC commissioner appointed by Gov. Gavin Newsom in 2021 is John Reynolds, who was managing counsel of Cruise until 2019.

    Resistance is building locally and nationally. Cathy Chase, president of Advocates for Highway and Auto Safety, a nonprofit in Washington seeking more regulation and data transparency on autonomous vehicles as part of its mission for more highway and road safety, said it was “illogical and irresponsible at best, and dangerous and deadly at worst, to go forward with any expansion until the significant problems have been resolved.”

    The San Francisco Municipal Transportation Authority (SFMTA) wrote letters of protest to both company’s applications. In May, the SFMTA said that since it wrote its first letter in January, “new hazards from driverless AV operations in San Francisco have been reported, and general public complaints about driverless AV operations have increased significantly.”

    In May, a Waymo vehicle hit and killed a small dog that was off leash, while a test driver was at the wheel, in what the company said was an unavoidable accident. In June, a Cruise vehicle with no driver started to enter a mass shooting scene in the Mission District, and a video on Twitter showed a police officer yelling to get the car removed. Cruise said a lane was open for emergency vehicles and that its car did a U-turn and pulled over. In April, five Waymo cars stopped and blocked traffic in the Balboa Terrace area, in dense fog, a big problem for the vision systems.

    The letters note that both Waymo and Cruise have “committed numerous violations that would preclude any teenager from getting a California’s Driver’s License.” The SFMTA also calls out the PUC for relying on the DMV for approvals, saying that its draft resolution to approve expansions of both companies is an attempt to “deflect rather than exercise the Commission’s duty to protect public safety.”

    Waymo said it has been working with public safety officials and provides them a phone number to reach Waymo directly in the event that one of its cars stop. Cruise said it is proud of its safety record “which is publicly reported and includes millions of miles driven in an extremely complex urban environment.” Both companies have over 30 letters of support for their plans, from a range of groups including many representing the disabled, such as the National Federation of the Blind of California.

    “It’s because of the donations,” Peskin said.

    But the city’s fire chief Nicholson said there needs to be more from the companies than PR statements and lessons on how to stop their vehicles.

    “They really need to sit down with us and figure out a solution,” she said, adding that when the fire department is in the middle of putting out a fire or rescuing victims or dealing with a health emergency, “to have to handle one of their vehicles, it’s just ridiculous.”

    As is the case with many new technologies, history does tend to repeat itself.

    Chris Gerdes, a professor of mechanical engineering at Stanford University and co-director of the Center for Automotive Research at Stanford (CARS) said that as part of work he has been doing with Ford Motor Co.
    F,
    +0.73%
    ,
    he has been researching ethical and legal issues associated with automated vehicles. These same issues came up when the first automobiles started to arrive on public streets at the turn of the 20th century, clashing with horses and buggies.

    “You go back and look at the debates when the car came out,” Gerdes said, and “there were a lot of debates around should these things be allowed on the road, should they be allowed everywhere? These questions that are coming now were asked about cars back in the day. They can block the road, they can scare horses. Is this something we want to have on the roads? Is it even legal for them to be on the roads?”

    But there is a need to demonstrate that driverless cars are compatible with existing laws and the uses of the roads, he said. “The question becomes at what point do these isolated incidents add to up to danger, to what extent do these compromise the city’s priorities or mobility and traffic flow.” He said they need to compare the autonomous-vehicle data with that from human drivers.

    The SFMTA provided comparison data in its letters of protest. According to the SFMTA, based on data filed with the NHTSA, Cruise’s injury crash rate is estimated to have been 506 injury crashes per 100 million vehicle miles traveled (VMT) between June and November, 2022—approximately 6.3 times the 2021 national average, which is 80 injury crashes per 100 million VMT. Waymo’s injury crash rate is estimated to be 104 injuries per 100 million VMT, approximately 1.3 times the national average, the SFMTA said, when looking at the same period.

    “The collision rate from that small fraction of Cruise driverless operations appears to exceed the collision rate for human drivers,” the SFMTA said in its Cruise letter. For Waymo, the agency said it recommends the commission expand on the findings with a more thorough analysis. “Within the complex driving environment of San Francisco city streets, we must conclude that the technology is still under development and has not reached this goal,” the SFMTA said in its Waymo letter.

    Some in San Francisco are hopeful the delay of the PUC meeting to July 13 is a good sign that the commission is listening to more input from city officials. In its letters, the SFMTA and the San Francisco City Attorney hint at the next step they could take, noting that the PUC “must conduct an environmental review” of Cruise’s and Waymo’s expansion plans, because its actions could cause environmental impacts. What goes unsaid is that the city could seek to compel such a review with a lawsuit.

    Peskin said he has received letters from former employees of the companies saying that autonomous robotaxis are, as the fire chief said, “not ready for prime time.” The workers said they had signed nondisclosure agreements that kept them from saying so publicly. Peskin suggested it could end up like the tobacco industry’s whistleblower case.

    “We would rather work with them than waste taxpayers’ money on lawsuits,” Peskin said, adding that the companies could continue to test their cars with test drivers — an option that is not likely to be acceptable by the companies seeking to make money from their big investment.

    “San Francisco is the perfect place to test them,” he said. “But they still haven’t worked these kinks out.”

    The city of San Francisco is beaten down at the moment, thanks in part to its past close relationship with tech. As the downtown core suffers from the departure of the tech workers that defined it for the past decade, city officials are doing what they can to ensure that the technology some of them created does not become the next hated addition to the city.

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  • How a hawkish Fed could kill a baby bull-market rally in U.S. stocks

    How a hawkish Fed could kill a baby bull-market rally in U.S. stocks

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    It is the notion that the Federal Reserve could deliver a hawkish jolt to markets even if it refrains from raising rates when its two-day policy meeting ends on Wednesday.

    There are concerns that such an outcome could spark a turnaround in U.S. stocks, especially if an uncomfortably strong reading on May inflation — due this coming Tuesday just as the Fed’s policy meeting is slated to begin — pushes the central bank toward something even more extreme, like delivering a rate increase on Wednesday despite intimating that it plans to abstain.

    The May consumer-price index is forecast to rise 4.0% for the year, down from a rise of 4.9%, while the core index, excluding food and energy prices, is seen easing to a rise of 5.3% from 5.5%.

    On the other hand, signs that the economy has weakened and inflation has continued to fade would help the Fed to justify skipping a rate increase in June — as several senior officials have suggested it will — while signaling that a potential hike at its following meeting in July could be the final increase for the cycle.

    “Softening U.S. data should support calls that a June skip could eventually turn into a July pause. Next week, most of the data is expected to remain weak or little changed: retail sales could be flat m/m, the Fed regional surveys should remain in negative territory, and consumer sentiment will waver,” said Craig Erlam, senior market analyst at OANDA, in emailed commentary.

    See: The Fed’s crystal ball on inflation appears off the mark again. Here’s comes another fix.

    Wednesday’s meeting comes at a critical time for the market. U.S. stocks have powered ahead for more than six months, with the S&P 500
    SPX,
    +0.11%

    having risen more than 20% off its Oct. 12 closing low, according to FactSet. Just this past week, the index exited bear-market territory for the first time in a year.

    The index is up 12% so far in 2023, reversing some of its 19.4% decline from 2022, its biggest calendar-year drop since 2008, according to Dow Jones Market Data.

    So far this year, highflying tech stocks have helped to paper over weakness in other areas of the market. This has started to change over the past two weeks, as small-cap and value-stocks have lurched suddenly higher, but there are fears that the Fed could hurt the most interest-rate sensitive technology names if Chairman Jerome Powell hints at rates rising higher than investors presently anticipate.

    The so-called “Megacap eight” stocks — a group that includes both classes of Alphabet Inc. stock
    GOOG,
    +0.16%

    GOOGL,
    +0.07%
    ,
    Microsoft Corp.
    MSFT,
    +0.47%
    ,
    Tesla Inc.
    TSLA,
    +4.06%
    ,
    Microsoft Corp.
    MSFT,
    +0.47%
    ,
    Netflix Inc.
    NFLX,
    +2.60%
    ,
    Nvidia Corp.
    NVDA,
    +0.68%
    ,
    Meta Platforms Inc.
    META,
    +0.14%

    — have driven nearly all of the S&P 500’s gains this year, according to Ed Yardeni, president of Yardeni Research, who included his analysis in a note to clients.

    But since the beginning of June, the Russell 2000
    RUT,
    -0.80%
    ,
    a gauge of small-cap stocks in the U.S., has risen more than 6.6%, according to FactSet data. The Russell 1000 Value Index
    RLV,
    -0.15%

    has also gained nearly 3.7% in that time. During this period, both have outperformed the tech-heavy Nasdaq Composite
    COMP,
    +0.16%
    ,
    although the Nasdaq remains the market leader, having risen 26.7% since Jan. 1.

    Concerns about the Fed’s plans intensified this week after the Bank of Canada delivered a surprise interest-rate hike, ending a four-month pause. The BOC’s decision followed a similar move by the Reserve Bank of Australia, and partly as a result, U.S. Treasury yields rose and tech-heavy stocks tumbled, with the Nasdaq logging its biggest drop since April 25, according to FactSet.

    While small-caps held up amid the chaos, the reaction stoked fears that something similar might be in store for markets when the Fed delivers its latest decision on interest rates Wednesday.

    Consequences of a ‘hawkish pause’

    Stocks could be in for more turbulence if the Fed signals it plans to follow the BOC and RBA with a hawkish surprise of its own. And it wouldn’t necessarily need to hike rates to pull this off, market strategists said.

    Emerging signs of complacency in the market could complicate its reaction. That the Cboe Volatility Index has fallen back below 15
    VIX,
    +1.32%

    for the first time since before the arrival of COVID-19 is one such sign that investors aren’t worried enough about a potential selloff, said Miller Tabak + Co.’s Chief Market Strategist Matt Maley.

    Another analyst likened the potential fallout from a hawkish Fed to the bad old days of 2022.

    “If the Fed signals that rates will be going up again, the market playbook could read more like 2022 than what we have seen so far in 2023,” said Will Rhind, the founder and CEO of GraniteShares, during a phone interview with MarketWatch.

    Perhaps the biggest wild card is Tuesday’s inflation report. If the numbers come in hot, Powell and his peers could face pressure to hike rates without priming the market first.

    For this reason, Rhind believes investors are underestimating the likelihood of a hike next week, even as Fed funds futures currently see a roughly 70% probability that the central bank will stand pat, according to the CME’s FedWatch tool.

    And Rhind isn’t the only one. Leslie Falconio, chief investment officer at UBS Global Wealth Management, says the Tuesday inflation report could be a make-or-break moment for markets, summing up fears expressed elsewhere on Wall Street in a recent note to clients.

    “We believe another rate increase is on the table, and that the CPI release on 13 June, a day before the Fed decision, will be decisive. In our view, another hike won’t have a material impact on the pace of economic growth,” Falconio said.

    What should investors watch out for?

    Assuming the Fed does forego a hike in June, there are a few key tells that investors should watch for to determine whether a “hawkish pause” is under way.

    Perhaps the most important will be how the Fed handles changes to its closely watched “dot plot.” A modestly higher median dot would send an unmistakable signal to the market that the Fed will continue with its campaign of tightening monetary policy, perhaps to the detriment of the market, said Patrick Saner, head of macro strategy at the Swiss Re Institute.

    “If the Fed skips but wanted to avoid the impression of the hiking cycle being done, it would need to include a revision of the dot plot. They could justify that with a more resilient GDP forecast and a higher inflation outlook. So I think it is the dots and then the statement that will be in focus,” Saner said during a phone interview with MarketWatch.

    Beyond that, whatever the Fed does or says will likely be viewed through the lens of economic data that is due out next week. In addition to the Tuesday inflation report, a report on May retail sales is due out Thursday, and a on consumer sentiment from the University of Michigan will land on Friday. All these data points could influence investors’ impressions of the state of the U.S. economy, and their expectations for how the Fed will behave as a result.

    See also: Puzzled by the ebb and flow of recession worries? Then the MarketWatch weekly recession worry gauge is for you.

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  • A stock-market milestone: Apple is now worth more than the entire Russell 2000

    A stock-market milestone: Apple is now worth more than the entire Russell 2000

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    The market capitalization of Apple Inc. has surpassed that of the entire Russell 2000 for two weeks, the longest stretch on record, according to Bloomberg data.

    Apple’s market capitalization, which measures how much the company is worth based on the value of all its outstanding stock, surpassed that of the Russell 2000
    RUT,
    +1.19%

    on April 27 and has held higher through Monday. The only other time that occurred was Sept. 1, 2020, when Apple’s valuation passed that of the small-cap index for only a day.

    Apple’s premium over this group of small-cap stocks continued to widen over the past two weeks as the consumer-technology giant reported earnings that surpassed Wall Street analysts’ expectations.

    With a market capitalization of roughly $2.7 trillion, Apple is now worth roughly $100 billion more than the combined value of all 2,000 stocks in the Russell 2000, according to Bloomberg data shared with MarketWatch.

    To be sure, the gap narrowed somewhat on Monday as Apple shares declined by 0.4% to $171.80, while the Russell 2000 gained 1.3% to trade at 1,763.

    A team of stock-market analysts from Bespoke Investment Group illustrated the trend in a chart shared on Twitter Monday.

    U.S. equity benchmarks have powered higher in 2023, but some say the strength in popular indexs like the S&P 500 and Nasdaq Composite has masked weakness in other corners of the market.

    Both the S&P 500, which has risen more than 7% year-to-date, and the Nasdaq Composite, which has risen nearly 18%, owe the bulk of their gains to a handful of megacap technology stocks including Apple, Microsoft Corp.
    MSFT,
    +0.16%
    ,
    Alphabet Inc.
    GOOG,
    -0.81%

    and Nvidia Corp.
    NVDA,
    +2.16%

    The top 10 stocks in the S&P 500 hold a 29% weight in the index, and have been responsible for around 70% of its year-to-date performance gains, according to a MarketWatch report from last week.

    See: The S&P 500 is top-heavy with tech. Here’s what that says about future stock-market returns.

    The Russell 2000, meanwhile, is essentially unchanged since the start of 2023. Apple, by comparison, has risen more than 32% since Jan. 1, according to FactSet data. The relative weakness in small-caps has inspired discussion about whether this might be a buying opportunity, as market strategists told Barron’s.

    See: Small-Cap Stocks Have Been Crushed. 3 With Big Potential.

    Small-caps have struggled against a plethora of headwinds since the start of 2023. Shrinking corporate earnings, a string of regional-bank failures and signs of a looming recession have taken a heavy toll. Facing so much uncertainty, equity investors have sought safety in shares of megacap technology names this year following a punishing selloff in 2022.

    “It is pretty incredible that one company could overtake an entire universe of small-cap stocks in terms of size,” said Callie Cox, U.S. equity strategist at eToro, during a phone interview with MarketWatch. “To me, it really speaks to how beaten down small-caps are.”

    When Apple reported earnings for the quarter ended in March last week, the company’s management revealed a surprise growth in its iPhone business, which helped to overcoming a shortfall in Mac revenue. The company also promised investors billions more in dividends and stock repurchases, which helped to boost the stock price. Apple’s shares traded higher in response.

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  • CEOs of Microsoft and Alphabet called to AI meeting at White House

    CEOs of Microsoft and Alphabet called to AI meeting at White House

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    Vice President Kamala Harris will host the chief executives of Alphabet GOOG GOOGL, Microsoft MSFT, OpenAI and Anthropic at the White House on Thursday to discuss artificial-intelligence issues.

    Harris and senior administration officials aim to have a “frank discussion” of the risks in AI development and of “ways we can work together to ensure the American people benefit from advances in AI while being protected from its harms,” according to an invitation for the meeting obtained by MarketWatch.

    The…

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  • U.S. stocks head for best day in 2 weeks on strong earnings from Meta and other big-tech names

    U.S. stocks head for best day in 2 weeks on strong earnings from Meta and other big-tech names

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    U.S. stocks rose on Thursday, on track for their biggest gain in two weeks, as another batch of strong big-tech earnings reports helped boost the broader market while offsetting signs of slowing economic growth.

    How are stocks trading

    On Wednesday, the Dow Jones Industrial Average fell 229 points, or 0.68%, to 33,302 as worries about First Republic Bank FRC overshadowed upbeat big-tech earnings.

    What’s driving markets

    For…

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  • Alphabet’s stock rises as earnings show Google ad sales holding steady

    Alphabet’s stock rises as earnings show Google ad sales holding steady

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    Alphabet Inc.’s stock rose 1.4% in extended trading Tuesday after Google’s parent company reported quarterly results that slightly topped analysts’ revenue and earnings estimates.

    Alphabet also said its board of directors authorized $70 billion in share repurchases.

    “Resilience in Search and momentum in Cloud resulted in Q1 consolidated revenues…

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  • Sergey Brin and other billionaires subpoenaed in JPMorgan-Epstein lawsuit: report

    Sergey Brin and other billionaires subpoenaed in JPMorgan-Epstein lawsuit: report

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    Google co-founder Sergey Brin is among the wealthy men who received a subpoena this week in the lawsuit over JPMorgan Chase & Co.s
    JPM,
    +1.21%

    ties to Jeffrey Epstein, the Wall Street Journal reported Friday, citing unnamed sources. The others who were subpoenaed by the U.S. Virgin Islands are Thomas Pritzker, executive chairman of Hyatt Hotels Corp.
    H,
    +1.65%

    ; Mortimer Zuckerman, a real estate magnate and owner of U.S. News & World Report; and Michael Ovitz, a former Hollywood talent agent, according to the Journal. Brin remains a board member of Alphabet
    GOOG,
    +2.65%

    GOOGL,
    +2.81%
    ,
    the parent company of tech giant Google. The U.S. Virgin Islands sued JPMorgan last year, saying the bank helped facilitate Epstein’s alleged sex trafficking and abuse. The subpoenas ask the men for any communications related to JPMorgan and Epstein, but it’s unclear why, the Journal said.

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  • U.S. stocks end lower, Dow books back-to-back weekly losses as banking sector stress reemerges

    U.S. stocks end lower, Dow books back-to-back weekly losses as banking sector stress reemerges

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    U.S. stocks ended lower Friday as worries about banking-sector stability reemerged following a bankruptcy filing by SVB Financial Group and the release of data showing banks borrowed $165 billion from the Federal Reserve over the past week.

    How stocks traded
    • The Dow Jones Industrial Average
      DJIA,
      -1.19%

      fell 384.57 points, or 1.2%, to close at 31,861.98.

    • The S&P 500
      SPX,
      -1.10%

      dropped 43.64 points, or 1.1%, to finish at 3,916.64.

    • The Nasdaq Composite
      COMP,
      -0.74%

      slid 86.76 points, or 0.7%, to end at 11,630.51, snapping a four-day win streak.

    For the week, the Dow fell 0.1%, the S&P 500 gained 1.4% and the Nasdaq climbed 4.4%, according to Dow Jones Market Data. The Dow booked back-to-back weekly losses while the Nasdaq saw its biggest weekly percentage gain since January.

    What drove markets

    U.S. stocks fell Friday as worries about the banking sector persisted.

    “The markets are up and down all this week, and they’re moving typically in big amounts, because there really isn’t any consensus on how the strains in the banking system will play” into the economy, said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, in a phone interview Friday. Investors are trying to get a sense for how quickly the economy may be slowing and whether the problems in the banking sector will lead to an “accelerated slowing,” he said.

    Concerns about the banking sector’s ability to withstand deposit flight reemerged Friday morning after SVB Financial Group
    SIVB,
    -60.41%

    announced it had filed for Chapter 11 bankruptcy protection. SVB is the holding company of Silicon Valley Bank , which was put into FDIC receivership last Friday.

    On Thursday, First Republic Bank announced that it would receive $30 billion of uninsured deposits from a group of large U.S. banks. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. were among the 11 banks that agreed to provide the deposits.

    Meanwhile, Federal Reserve data released Thursday afternoon in New York showed banks borrowed a combined $165 billion from the central bank. Most of the borrowing occurred via the Fed’s discount window. But a small amount was also tapped through the Fed’s new Bank Term Funding Program that allows bonds trading at a discount to be used as collateral, at par value. The fact that borrowing through the discount window has soared to a record high was adding to the market’s concerns about the banking sector, analysts said.

    See: Banks have borrowed $165 billion from the Fed in past week after SVB failure

    First Republic Bank
    FRC,
    -32.80%

    shares plunged 32.8% Friday, while Credit Suisse Group
    CS,
    -6.94%
    ,
    which earlier this week got a lifeline from the Swiss National Bank, closed 6.9% lower, according to FactSet data.

    At least four major banks have put restrictions on trades that involve troubled Swiss lender Credit Suisse Group or its securities, Reuters reported Friday, citing people with direct knowledge of the matter.

    “I think there are still a lot of questions right now,” said Mark Luschini, chief investment strategist at Janney, during a phone interview with MarketWatch. “Investors can’t seem to hold their enthusiasm for equities for longer than a 24-hour news cycle.”

    It’s not hard to understand why investors are still so anxious about the banking sector given the surge in borrowing from the Fed, said Matt Maley, chief market strategist at Miller Tabak + Co.

    “Given that banks borrowed over $150bn at the Fed’s discount window on Wednesday, which compares to $4.4bn the week before, one can understand why investors are worried that the situation might be a bit more dire than the authorities are admitting to right now,” Maley said in emailed commentary.

    In economic news, the Conference Board said Friday that the U.S. leading economic index fell 0.3% in February, marking the 11th straight monthly decline. U.S. industrial production was flat in February, data released Friday by the Fed show.

    Meanwhile, the University of Michigan’s latest reading on consumer sentiment showed consumers were more downbeat in March than at ay time in the last four months.

    While stocks fell Friday, they finished the week mostly higher. The Dow Jones Industrial Average slipped 0.1% for the week, while the S&P 500 booked a 1.4% weekly gain and the technology-heavy Nasdaq Composite saw a weekly rise of 4.4%, according to Dow Jones Market Data.

    Companies in focus
    • FedEx Corp.’s stock 
      FDX,
      +7.97%

       jumped 8% after beating analyst estimates in its fiscal third-quarter earnings. The shipping firm also lifted its profit forecast for the full fiscal year.

    • Shares of PacWest Bancorp 
      PACW,
      -18.95%

      and Western Alliance Bancorp 
      WAL,
      -15.14%

      tumbled as regional banks continued to face pressure, with PacWest falling almost 19% and Western Alliance dropping 15.1%.

    • Shares of Microsoft Corp.
      MSFT,
      +1.17%

      rose 1.2% as analysts saw the latest iteration of Chat GPT giving the tech giant an even greater edge. In other megacap tech names, Alphabet Inc.’s Class A
      GOOGL,
      +1.30%

      shares gained 1.3% while semiconductor giant Nvidia Corp.
      NVDA,
      +0.72%

      advanced 0.7%.

    —Steve Goldstein contributed to this report.

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  • Big Tech just added to a shrinking forecast, but maybe Bob Iger can brighten the mood

    Big Tech just added to a shrinking forecast, but maybe Bob Iger can brighten the mood

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    Wall Street’s expectations for 2023 have been diving as forecasts for the new year come in light, and the news could get worse once they factor in disappointing results from Big Tech. But at least Bob Iger is coming back for a sequel.

    Google, Facebook, Amazon and Apple all disappointed with holiday earnings this week. Their forecasts ranged from nonexistent to piecemeal to meh, and the fallout will only add to the biggest dive in Wall Street’s expectations through the beginning of a year since 2016.

    Analysts’ average forecast for 2023 earnings from the S&P 500 index
    SPX,
    -1.04%

    dropped by 2.5% in January, according to FactSet Senior Earnings Analyst John Butters, the worst in seven years. Those projections began heading lower last year, and the decline is only steepening — analysts are now projecting 3% earnings growth in 2023, and that is contingent on a big holiday rebound from the results being released this quarter.


    Uncredited

    The news was even worse for the first quarter, for which projections declined 3.3% in January as companies whiffed on their forecasts at a rapid pace: 86% of the 43 companies that have guided for first-quarter earnings have missed projections, Butters reported. Earnings are now expected to decline 4.2%, which would be the first year-over-year earnings decline since the third quarter of 2020, when the COVID-19 pandemic write-offs started to come in.

    Big Tech only added to the downward trajectory in recent days. Amazon.com Inc.
    AMZN,
    -8.43%

    missed on its holiday earnings as well as its forecast for the first quarter, and that company could determine if S&P 500 profits rise in 2023 all on its own. Amazon’s worst holiday earnings since 2014 could also contribute to the consumer discretionary sector’s first earnings decline since the beginning of the pandemic, with holiday sector earnings now expected to drop more than 5%.

    Google parent Alphabet Inc.
    GOOGL,
    -2.75%

    GOOG,
    -3.29%

    and Facebook parent Meta Platforms Inc.
    META,
    -1.19%

    also missed their respective earnings targets amid problems with the digital-advertising industry, leading to the communications-services sector having the worst earnings season in the S&P 500. Profit has declined 25.2% in that sector so far, the worst among the 11 S&P 500 sectors, but would be down just 6.5% without the effects of Meta and Alphabet, Butters reported.

    Apple Inc.
    AAPL,
    +2.44%

    also didn’t do projections any favors, reporting its biggest sales decrease since 2016 and an earnings miss Thursday afternoon. In a piecemeal forecast, executives projected a similar sales decline in the calendar first quarter, though unofficially.

    This week in earnings

    After the busiest week in earnings season wrapped up, don’t expect much of a breather — 95 S&P 500 companies are expected to report in the week ahead, the third consecutive week with at least 90 companies reporting. There will be plenty of intrigue among companies not in the S&P 500 too, including Robinhood Markets Inc.
    HOOD,
    -3.59%

    and Affirm Holdings Inc.
    AFRM,
    -14.14%

    reporting together on Wednesday afternoon.

    Only one Dow Jones Industrial Average
    DJIA,
    -0.38%

    stock will report, but that is the Wednesday call you will want to tune in for: Bob Iger’s return to the Walt Disney Co.
    DIS,
    -2.21%

    earnings show.

    The calls to put on your calendar
    The numbers to watch

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  • Google suffered ‘pullback’ in ad spending over holidays, Alphabet stock falls after earnings

    Google suffered ‘pullback’ in ad spending over holidays, Alphabet stock falls after earnings

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    Alphabet Inc.’s stock slipped nearly 5% in extended trading Thursday after the tech giant missed slightly on revenue and earnings in ho-hum quarterly results.

    Google’s parent company reported fiscal fourth-quarter total revenue of $76.05 billion, up from $75.3 billion a year ago. Earnings were $13.62 billion, or $1.05 per share, compared with $20.64 billion, or $1.53 per share, last year. Alphabet’s revenue, minus traffic-acquisition costs (TAC), was $63.12 billion, vs. $61.9 billion a year ago.

    “We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet,” Chief Executive Sundar Pichai said in a statement announcing the results. The company recently announced 12,000 layoffs and has scaled back hires.

    In a conference call later with analysts, Google Chief Business Officer Philipp Schindler said a “pullback” in spending by advertisers amid a more challenging economy as well as foreign-exchange headwinds impacted sales.

    Analysts polled by FactSet expected Alphabet
    GOOG,
    +7.27%

    GOOGL,
    +7.28%

    to report total revenue of $76.2 billion and earnings of $1.18 per share, with sales expected to be in line with last year’s results and profit declining from the holiday season a year ago. Revenue, minus TAC, were modeled at $63.2 billion, which also suggests little to no growth from last year.

    Google’s total advertising sales slid to $59 billion from $61.2 billion a year ago, missing analysts’ average expectations of $60.44 billion. Google Cloud brought in $7.32 billion, compared with $5.54 billion last year. YouTube ad sales slipped to $7.96 billion from $8.63 billion a year ago.

    “The search giant underperformed our expectations across almost all business units, most importantly its core ad-search segment,” Jesse Cohen, senior analyst at Investing.com, said. “Once again, YouTube growth slowed to a crawl amid tough competition from TikTok and other players in the video-streaming space.”

    A dip in digital advertising has defined the past few quarters for Google, Meta Platforms Inc.
    META,
    +23.28%
    ,
    Snap Inc.
    SNAP,
    +9.93%
    ,
    Pinterest Inc.
    PINS,
    +8.99%

    and other companies dependent on ads. Meta’s better-than-expected quarterly report Wednesday was a sign of encouragement after Snap had another desultory quarterly performance.

    Indeed, Alphabet shares closed up 7% in Thursday’s regular session, at $107.74, before retreating 5% in after-hours trading.

    Read more: Alphabet earnings: What to expect from the Google parent company

    “After Alphabet’s advertising revenue cycle reached peak growth” in the second quarter of 2021, revenue for this part of the business is set to decelerate for the sixth quarter in a row, said Monness, Crespi, Hardt analyst Brian White, who forecast a 3% drop in the recently completed quarter.

    On Thursday, Alphabet Chief Financial Officer Ruth Porat said that beginning in
    the current quarter, AI subsidiary DeepMind will be included in Alphabet’s corporate costs rather than in Other Bets.

    Alphabet’s stock has declined 24.7% over the past 12 months. The S&P 500 index 
    SPX,
    +1.47%

    is down 6.7% over the past year.

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  • Could Big Tech layoffs keep growing? Apple, Amazon, Facebook and Google may give hints in biggest week of earnings.

    Could Big Tech layoffs keep growing? Apple, Amazon, Facebook and Google may give hints in biggest week of earnings.

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    In the biggest week of the holiday-earnings season, Big Tech results will receive the spotlight amid thousands of layoffs that could only be the beginning.

    After tech stocks were decimated in 2022, investors will be looking for signs of a turnaround in holiday reports and potential forecasts for the year ahead from three of 2022’s top five market-value losers: Amazon.com Inc.
    AMZN,
    -0.66%
    ,
    Apple Inc.
    AAPL,
    -0.63%

    and Meta Platforms Inc.
    META,
    -0.60%
    .
    The other two stocks on that list — Microsoft Corp.
    MSFT,
    -1.38%

    and Tesla Inc.
    TSLA,
    -0.15%

    — reported last week, and Microsoft’s results in the wake of a mass-layoffs announcement did not bode well for its Big Tech brethren.

    See also: Microsoft could be the cloud sector’s ‘canary in the coal mine’

    Those companies — along with Google parent Alphabet Inc.
    GOOGL,
    -1.32%

    GOOG,
    -1.49%

    — will deliver results after finding themselves in unfamiliar territory: A backdrop of layoffs amid slowing demand for core products like digital ads, electronics and e-commerce, after a two-year pandemic surge and a two-decade-plus honeymoon with investors. Some analysts say the bottom hasn’t arrived, for either their finances or their workforces.

    The one Big Tech company that hasn’t taken a sword to its payroll is Apple, which also increased its staff the least among the group during the COVID-19 pandemic. Apple shed $846 billion from its market cap last year, and now reports after its core product was part of the smartphone industry’s worst year since 2013 and worst holiday-season decline on record. The iPhone maker could also face questions from Wall Street about changing up its product sourcing, which has relied heavily on China, a nation whose COVID-19 restrictions have constrained production of some phones.

    While the tech-industry layoffs have yet to hit Apple, some analysts say the company is unlikely to be spared, despite Chief Executive Tim Cook requesting and receiving a healthy cut to his compensation.

    “Similar to other big technology companies, we expect Apple to adjust its head count to reflect an increasingly challenging global macroeconomic environment,” D.A. Davidson analyst Tom Forte said in a research note Tuesday.

    Rivals that have already cut could face more if profit continues to fall along with revenue growth. Alphabet, for instance, is cutting 12,000 employees, but an activist investor has already said that is not enough considering how much the company grew during the pandemic, and the difficulties it now faces in the online-ad sector.

    Opinion: Microsoft’s big move in AI does not mean it will challenge Google in search

    Analysts have said Meta’s “darkest days” are still ahead, as it navigates a round of more than 11,000 layoffs, competition from TikTok and its early stumbles in the metaverse. While cutting, Chief Executive Mark Zuckerberg has promised to keep spending on metaverse development, even as the efforts slash the Facebook parent company’s previously healthy bottom line.

    “In 2023, we expect Meta to remain engulfed in arduous battles inside the Octagon,” Monness Crespi Hardt analyst Brian White said in a research note on Thursday. “In the long run, we believe Meta will benefit from the secular digital ad trend and innovate in the metaverse; however, regulatory scrutiny persists, internal headwinds remain, and we believe the darkest days of this downturn are ahead of us.”

    Full Facebook earnings preview: Meta’s ‘darkest days’ are ahead, but some analysts say ad sales are still on track

    Online retailer Amazon
    AMZN,
    -0.66%

    was the first Big Tech company to publicly declare cost-cutting was in order a year ago, and still coughed up $834 billion in market value in 2022. It kicked off 2023 with plans to lay off more than 18,000 workers as struggles continued throughout last year, when inflation siphoned away more consumer dollars toward essentials.

    Amazon’s own AWS cloud-infrastructure unit has helped to drive sales in years past, as businesses built out their tech infrastructures. But remarks and the outlook from Microsoft executives — the third-biggest market-cap loser of 2022, and a big barometer for tech spending overall — weren’t exactly encouraging for cloud growth: Executives there last week warned of “moderating consumption growth” for its own cloud business.

    For more: One company could determine whether U.S. corporate profits rise to a record in 2023

    “Sentiment was already bearish on AWS, with investors looking for slowing revenue over the next three quarters, largely confirmed after Microsoft earnings and conversations with industry checks,” Oppenheimer analyst Jason Helfstein said in a note on Wednesday. “Positively, we believe e-commerce revenue has stabilized, and margins should improve from organic scale and announced head-count reductions.”

    Layoffs are also starting to spread beyond Big Tech companies that grew fast during the pandemic in response to massive demand spikes. International Business Machines Corp.
    IBM,
    +0.76%

    confirmed plans for 3,900 layoffs as it reported earnings, despite already reducing its workforce by at least 20% during the pandemic.

    One sector to watch is semiconductors, where a chip shortage has turned into a glut: Chip-equipment maker Lam Research Corp.
    LRCX,
    +0.04%

    announced layoffs in the past week as Silicon Valley semiconductor giant Intel Corp.
    INTC,
    +0.27%

    displayed “astonishingly bad” results while laying off workers. When Intel rival Advanced Micro Devices Inc.
    AMD,
    -1.64%

    reports this week, it could determine whether there is any silver lining in the semiconductor storm.

    Earnings preview: AMD faces even more scrutiny after ‘astonishingly bad’ Intel outlook

    Wedbush analyst Daniel Ives said in a Sunday note that a common theme of this week’s Big Tech earnings will be that “tech layoffs will accelerate with more pain ahead to curb expenses,” though he added that “Apple will likely cut some costs around the edges, but we do not expect mass layoffs from Cupertino this week.”

    Big Tech earnings were a salve to other problems in the market for the past decade-plus, but with layoffs already under way and doubts about the path forward, don’t expect salvation from their results this week.

    This week in earnings

    For the week ahead, 107 S&P 500
    SPX,
    -0.19%

    companies, including six members of the Dow Jones Industrial Average
    DJIA,
    +0.18%
    ,
    will report results, according to FactSet. While more Dow components reported last week, this will be the busiest week for S&P 500 holiday earnings of the season, FactSet senior earnings analyst John Butters confirmed to MarketWatch.

    Appliance-maker Whirlpool Corp.
    WHR,
    +1.18%

    reports on Monday, after it forecast fourth-quarter sales that were below expectations, following what it called a “one-off supply-chain disruption” and the pandemic home-renovation boom.

    On Tuesday, package-deliverer United Parcel Service Inc.
    UPS,
    -0.26%

    reports, amid questions about holiday-season demand. So does streaming service Spotify Technology,
    SPOT,
    -0.02%

    following its own layoffs and suggestions of possible price hikes, as well as McDonald’s Corp.
    MCD,
    -0.30%
    ,
    amid concerns that rising prices are keeping people from dining out. Exxon Mobil Corp.
    XOM,
    -0.99%
    ,
    Caterpillar Inc.
    CAT,
    -0.12%
    ,
    Snap Inc.
    SNAP,
    +0.64%

    and Pfizer Inc.
    PFE,
    +0.72%

    also report Tuesday.

    Earnings outlook: McDonald’s earnings haven’t been hit by higher prices

    On Wednesday, T-Mobile US Inc.
    TMUS,
    +0.23%

    reports, in the wake of a data breach and wobbling cellphone demand. Coffee chain Starbucks Corp.
    SBUX,
    -0.58%

    reports on Thursday, with analysts likely to be zeroed in on U.S. demand and China’s reopening, after executives said they were confident that higher prices, along with enthusiasm from younger customers and for customizable drinks, could help them navigate any potholes in the economy.

    For the Big Tech companies, Thursday is also the big day: Apple, Amazon and Alphabet will report that afternoon, after Meta reports the prior day.

    The calls to put on your calendar

    WWE upheaval: World Wrestling Entertainment Inc.
    WWE,
    +0.91%

    reports earnings on Thursday, as Vince McMahon — who returned to the professional-wrestling organization this month following allegations of sexual misconduct — seeks a buyer or some other so-called “strategic alternative” for the company.

    Analysts have speculated how the company’s wrestling events and backlog of media content might be repurposed, with some entertaining the possibility of interest from Amazon or Netflix Inc.
    NFLX,
    -0.39%
    .
    But WWE has struggled to develop story lines that stick with viewers, and has thinned its ranks of wrestlers.

    The Wall Street Journal this month reported that McMahon would pay a multimillion-dollar settlement to a former referee who accused him of raping her. Among the changes since McMahon returned was the departure of his daughter, who had been promoted to co-CEO after he stepped down from the role last year.

    There isn’t much clarity on whether Vince McMahon will be on Thursday’s earnings call, which was moved from the morning to the afternoon due to a scheduling conflict. But it should offer drama no matter who attends.

    The numbers to watch

    GM and Ford auto sales: Auto makers General Motors Co.
    GM,
    -2.00%

    and Ford Motor Co.
    F,
    -0.94%

    will issue results on Tuesday and Thursday respectively, amid signs of waning demand and rising interest rates that have made car loans more expensive. Despite falling new-vehicle sales in the third quarter, GM managed to keep its own sales higher, the AP noted.

    Mary Barry, GM’s chief executive, called out the popularity of vehicles like the Escalade, the Chevrolet Bolt EV and some pickups and SUVs during the auto maker’s third-quarter earnings call in October. During that quarter, GM said it completed and shipped nearly 75% of the unfinished vehicles held in its inventory in June. She said supply-chains were opening up again, but added that “short-term disruptions will continue to happen.”

    The auto makers report as they try to put a chip shortage and other production constraints behind them. But some forecasts call for 2022 auto sales, or sales volumes, to be the weakest in roughly a decade. Electric vehicle maker Tesla’s recent price cuts could also cut into GM’s and Ford’s own EV sales.

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  • Feds poised to file another antitrust suit against Google this week: report

    Feds poised to file another antitrust suit against Google this week: report

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    The U.S. Justice Department is preparing to sue Alphabet Inc. in the coming days over its dominance in the online ad market, according to a report late Monday.

    Citing sources familiar with the matter, Bloomberg News reported the antitrust suit is expected to be filed in federal court before the end of this week, and as soon as Tuesday.

    The pending filing has been rumored for months, after the Justice Department reportedly rejected concessions offered by Google last summer. A Google spokesperson declined to comment Monday.

    Google dominates the online ad market, earning more than one-quarter of U.S. digital-advertising revenue, according to estimates from research firm Insider Intelligence Inc.

    It would be the second antitrust suit filed by the Justice Department against Google parent Alphabet. In October 2020, the DOJ accused Google of being “a monopolist in the general search services, search advertising, and general search text advertising markets.” In a 2020 blog post, Google called that suit “deeply flawed” and said people use Google because they choose to, not because they are forced to. That case is set for trial in the fall.

    Alphabet faces a number of other lawsuits targeting its business practices, including a $16.3 billion class-action suit filed in the U.K. in November accusing the tech giant of reaping “super profits” at the expense of thousands of smaller companies. Google called that lawsuit “speculative and opportunistic.”

    Alphabet’s Class A shares
    GOOGL,
    +1.81%

    are down 24% over the past 12 months while its Class C shares
    GOOG,
    +1.94%

    have fallen about 22%, compared to the S&P 500’s
    SPX,
    +1.19%

    9% dip over the past year. Both classes of Alphabet shares dipped nearly 1% in after-hours trading Monday after the Bloomberg report was published.

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  • Elon Musk: Google’s Alphabet had ‘standing interest’ in buying Tesla

    Elon Musk: Google’s Alphabet had ‘standing interest’ in buying Tesla

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    Google’s parent Alphabet Inc.
    GOOG,
    +1.94%

    GOOGL,
    +1.81%

    had a “standing interest” in buying Tesla Inc.
    TSLA,
    +7.74%
    ,
    Chief Executive Elon Musk said in court Monday, referring to an earlier deposition. That factored into Musk’s decision to try to take Tesla private then, the CEO said. Musk is under cross-examination by his lawyer, Alex Spiro, after an hours-long examination by a plaintiff’s attorney in which he said his “funding secured” tweet was “absolutely truthful” as he had initial commitments from a Saudi Arabia investment fund and also could have sold part of his stake in privately held SpaceX.

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  • More than 55,000 global tech workers laid off in the first few weeks of 2023, says layoff tracking site

    More than 55,000 global tech workers laid off in the first few weeks of 2023, says layoff tracking site

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    More than 55,000 global technology sector employees have been laid off in the first few weeks of 2023, according to data compiled by the Layoffs.fyi website.

    The website’s tally of global tech layoffs has almost doubled from just over 25,000 on Tuesday.

    The data suggest 2023 is on pace to surpass 2022 for global tech redundancies, with 154 tech companies laying off 55,324 employees in the first few weeks of the year. Last year, 1,024 tech companies laid off 154,336 employees, according to Layoffs.fyi.

    Related: More than 25,000 global tech workers laid off in the first weeks of 2023, says layoff tracking site

    Layoffs.fyi was set up by San Francisco-based startup founder Roger Lee to track layoffs during the COVID-19 pandemic. Lee is the co-founder of Human Interest, a digital 401(k) provider for small businesses and Comprehensive, an employee compensation platform.

    Major U.S. tech companies are firmly in the layoffs spotlight. This week Google parent Alphabet Inc.
    GOOGL,
    +4.69%

    GOOG,
    +4.80%

    confirmed plans to lay off about 12,000 workers globally and Intel Corp.
    INTC,
    +1.62%

    said it is slashing hundreds of jobs in Silicon Valley.

    Microsoft Corp.
    MSFT,
    +3.19%

    confirmed plans to cut about 10,000 positions. The software maker’s layoffs did not come completely out of the blue. Earlier reports from Sky News and Bloomberg indicated that Microsoft was preparing to make cuts.

    See Now: Google joins Intel, Microsoft Amazon, Salesforce and other major companies laying off thousands of people

    In a blog post, Microsoft CEO Satya Nadella said that while the company is eliminating roles in some areas, the company will continue to hire in key strategic areas. The CEO did not specify which areas will see hiring but did describe advances in artificial intelligence as “the next major wave of computing.”

    Earlier this month Coinbase Global Inc.
    COIN,
    +8.56%

     announced 950 job cuts in an attempt to cut costs.

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  • Tesla stock wipes out three-day bounce, falls to lowest price in more than 2 years

    Tesla stock wipes out three-day bounce, falls to lowest price in more than 2 years

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    It has taken just one day for Tesla Inc.’s stock to erase the entire bounce it enjoyed over the last three days trading sessions of 2022, as disappointing deliveries data helped trigger the biggest selloff in more than two years.

    The stock’s
    TSLA,
    -12.24%

    Tuesday drop knocked the electric vehicle maker’s market capitalization to 15th on the list of most valuation S&P 500 index companies.

    On Tuesday, Tesla’s market cap fell below that of consumer products company Procter & Gamble Co.
    PG,
    +0.01%
    ,
    with a current market cap of $359.18 billion, and was just below Nvidia Corp.
    NVDA,
    -2.05%

    at $352.15 billion, according to FactSet data. Tesla sat just above Chevron Corp.
    CVX,
    -3.06%
    ,
    which was at $336.43 billion. (See list of S&P 500’s 20 most valuable companies as of Tuesday’s closing prices below.)

    Tesla’s stock took a $15.08, or 12.2% dive, to $108.10 on Tuesday, to lead the S&P 500’s
    SPX,
    -0.40%

    decliners, after the company reported over the weekend that fourth-quarter deliveries that came up short of expectations for the third quarter in a row. It suffered the biggest one-day decline since it plummeted 21.1% on Sept. 8, 2020, and closed at the lowest price since Aug. 13, 2020.

    Don’t miss: Tesla delivery-target miss shows ‘demand cracks clearly happening’ that mean ‘numbers could be materially reset’ for coming years, analysts write.

    With about 3.16 billion shares outstanding as of Oct. 18, the stock’s decline shaved about $47.62 billion off Tesla’s market cap, to bring it down to $341.35 billion. That’s a far cry from the peak market cap of $1.24 trillion reached exactly one-year ago.

    After the stock hit the deepest oversold reading in its history based on the widely followed Relative Strength Index momentum indicator on Dec. 27, following the longest losing streak in more than four years, it ran up $14.08, or 12.9%, over the past three days.

    If there’s a bright side to Tuesday’s stock selloff, it’s that even though the price fell below the Dec. 27 closing price, the RSI ended the day at 24.86, which is up from the Dec. 27 record low of 16.56.

    That could be a preliminary sign of what chart watchers call “bullish technical divergence,” which is when prices make lower lows while the RSI makes a higher low. It’s still rather early to make that determination, however, as the stock needs to start bouncing again to see if RSI bottoms above the previous low.

    Market caps of the Top 20 most valuable S&P 500 companies:

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