Markets closed lower yesterday, with the S&P 500 off 0.5%, driven by weak guidance from semiconductor firms like Texas Instruments and a post-earnings slump in Netflix. Tesla’s shares fell sharply in after-hours trading yesterday after the EV giant reported earnings that missed estimates, despite revenue growth, adding pressure on tech-heavy indices. The reaction underscores how elevated valuations (Tesla trades at ~100x forward earnings) leave little room for anything less than blowout results. Perhaps Tesla earnings report is a warning that the other mega tech companies will disappoint too. Alphabet, Meta and Microsoft are expected to report next week.
We are talking about high valuations in the tech sector, a company could report good earnings but the stock falls because the good news is priced in. That’s how corrections start, investors realise there is no more upside so they sell. This happens at a time when the S&P 500 has rallied in five waves.