A selloff in the world’s largest technology companies hit stocks, with Wall Street traders gearing up for a deluge of results from the industry that has powered the bull market.

Equities extended their slide from a record, with the S&P 500 breaking below 5,000 and the Nasdaq 100 falling over 2 per cent. More than half of the “Magnificent Seven” cohort of tech megacaps will announce results next week — leaving investors wondering whether those firms are going to live up to the high expectations set for artificial intelligence. Just Friday, a pair of AI darlings — Nvidia Corp. and Super Micro Computer Inc. — sank at least 10 per cent.

Profits for the seven biggest growth companies in the S&P 500 — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia, Meta Platforms Inc. and Tesla Inc. — are on course to surge 38 per cent in the first quarter, according to Bloomberg Intelligence. When excluding them, the rest of the benchmark index’s profits are anticipated to shrink by 3.9 per cent.

“Investors are expecting not just strong results — but strong guidance,” said Quincy Krosby, chief global strategist at LPL Financial. “Any disappointment from the mega-tech names reporting could push this week’s oversold market deeper into oversold territory.”

The S&P 500 saw its sixth consecutive drop — the longest losing streak since October 2022. The plunge in Nvidia wiped out over US$200 billion in value, with the Nasdaq 100 down the most this year. Netflix Inc. tumbled, taking the shine off stellar financial results following management’s decision to stop reporting quarterly subscriber data.

Treasury 10-year yields declined one basis point to 4.62 per cent — almost erasing an earlier plunge of 14 basis points. Oil trimmed a major advance to trade only marginally higher after Iranian media appeared to downplay the effect of Israeli strikes.

Tech came under heavy pressure this week after Taiwan Semiconductor Manufacturing Co. scaled back its outlook for a chip market expansion and ASML Holding NV posted disappointing orders. That’s raised some eyebrows on whether those forecasts are a sign of what’s to come as other giants prepare to post earnings. Intel Corp.’s numbers are also due next week.

The S&P 500 saw its worst week since March 2023, extending a drawdown from its all-time high to more than 5 per cent. After a 10 per cent gain in the first quarter — the strongest start to a year since 2019 — investors have been increasingly skeptical about how much further it could go over the near term, even accounting for the continued strength in the economy.

A drumbeat of hawkish Fedspeak and a flare-up in inflation worries weighed heavily on sentiment. While the latest tensions in the Middle East seemed contained, traders opted for a cautious stance.

Nothing can be taken for granted, and markets may remain on edge — especially considering the looming weekend risk, according to Fawad Razaqzada at City Index and Forex.com. He added that inflation continues to be a focal point due to its potential influence on monetary policy.

“Geopolitical and political uncertainty join inflation, rates, and the Fed in pressuring markets, driving a rapid and dramatic shift in the complexion of markets and the attitude of investors,” said Mark Hackett at Nationwide.

Investors are pulling money out of equities as a strong U.S. economy and sticky inflation fuel concerns that the Fed will keep interest rates higher for longer, according to Bank of America Corp. strategists.

A team led by Michael Hartnett wrote in a note that good economic news is now bad news for stocks, a shift in mindset from the first quarter when “good news = good.” Evidence of this is the $21.1 billion investors redeemed from stock funds in the two weeks through Wednesday, the most in a fortnight since December 2022, BofA said, citing data from EPFR Global.

The U.S. stock market’s retreat from all-time highs set late last month is giving investors parked in cash an opening to buy in, according to Sinead Colton Grant, chief investment officer of BNY Mellon’s wealth management arm.

The three-week slump in the S&P 500 Index is a healthy consolidation by traders after it soared 10 per cent in the first quarter, on top of a 24 per cent gain in 2023, she said. From here, Colton Grant expects the rally to not only resume but broaden based on strong earnings growth and continuing economic momentum, potentially pushing the S&P 500 beyond the higher end of her 5,000-5,400 target range before 2024 closes out.

Corporate Highlights:

• Trump Media & Technology Group Corp. says an illegal form of short selling might be behind the battering of its stock and it’s asking regulators at Nasdaq Inc. to step in.
• Procter & Gamble Co., the maker of Pampers diapers and Dawn dish soap, reported quarterly sales that fell short of Wall Street estimates, overshadowing an improved profit outlook.
• SLB, the world’s biggest oil-services provider, said it is gearing up for a rebound in activity in the Northern Hemisphere during the second quarter after starting off the year with typical seasonal slowness.
• Super Micro Computer Inc. sank after the maker of servers announced the date of its third-quarter results but didn’t pre-announce results.
• The U.S. Federal Aviation Administration is investigating an incident where a passenger was apparently granted unauthorized access to the cockpit of a United Airlines Holdings Inc. charter flight traveling from Denver to Toronto.
• Nordstrom Inc.’s founding family has notified the board of its interest in taking the company private.
• Mondi Plc walked away from a possible bidding battle for UK packaging rival DS Smith Plc, a move that secures a deal for U.S. bidder International Paper Co.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.9 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 2.1 per cent
• The Dow Jones Industrial Average rose 0.6 per cent
• The MSCI World index fell 0.8 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1 per cent to $1.0655
• The British pound fell 0.5 per cent to $1.2373
• The Japanese yen was little changed at 154.61 per dollar

Cryptocurrencies

• Bitcoin rose 1.2 per cent to $64,297.01
• Ether rose 1 per cent to $3,101.31

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.62 per cent
• Germany’s 10-year yield was little changed at 2.50 per cent
• Britain’s 10-year yield declined four basis points to 4.23 per cent

Commodities

• West Texas Intermediate crude rose 0.6 per cent to $83.22 a barrel
• Spot gold rose 0.4 per cent to $2,387.75 an ounce