Stocks sold off Wednesday, weighed down by underwhelming reports from two megacap tech companies, leading the S&P 500 and the Nasdaq Composite to post their worst session since 2022.

The broad market index lost 2.31%, closing at 5,427.13, while the tech-heavy Nasdaq slid 3.64% to end at 17,342.41. The Dow Jones Industrial Average shed 504.22 points, or 1.25%, closing at 39,853.87.

Shares of Google parent company Alphabet fell 5% for their biggest one-day drop since Jan. 31, when they dropped 7.5%. Although Alphabet reported a top- and bottom-line beat, YouTube advertising revenue came in below the consensus estimate. Meanwhile, Tesla shares declined 12.3% — their worst day since 2020 — on weaker-than-expected results and a 7% year-over-year drop in auto revenue.

Other major tech stocks fell in sympathy with Alphabet and Tesla. Nvidia and Meta Platforms respectively lost 6.8% and 5.6%, while Microsoft slid 3.6%.

Those reports mark investors' first look at how megacap companies fared during the second quarter. Reports from these names are of special interest to Wall Street as this small cohort is responsible for the bulk of this year's gains.

Wednesday's sell-off was caused by a perfect storm of an overbought market, high bar for earnings and a seasonally weak period for equities. That is why this pullback has not come as a total surprise to investors, according to Ross Mayfield, investment strategist at Baird.

"We would view this sell-off as ultimately quite viable, because it's against the backdrop of a bull market. And a healthy correction inside of a bull market is something that we view as a place of opportunity, rather than a place to get defensive or to try to shield your money from this volatility," Mayfield added in an interview with CNBC.

The small-cap Russell 2000 was down 2.1% on the day. For the month, however, the small-cap benchmark is up 7.2% as investors recently began rotating out of large-cap tech names into beaten-down smaller ones. In July, the Dow has gained 1.9%, while the S&P 500 has slipped 0.6% and the tech-heavy Nasdaq has fallen 2.2%.

Despite these misses from the megacap tech titans, the earnings season overall is off to a strong start. More than 25% of S&P 500 companies have reported their second-quarter earnings, with roughly 80% of them topping expectations, according to FactSet data.

Adding to investor concerns Wednesday morning was weaker-than-expected U.S. manufacturing data.

The U.S. PMI flash manufacturing output index fell to 49.5 in July, unexpectedly slipping into contraction territory as new orders, production and inventories declined. Economists had forecast a reading of 51.5, according to Dow Jones.

A Wednesday report also showed new home sales came in lighter than economists had expected for the month of June.

S&P 500, Nasdaq cinch worst-performing day since 2022

The S&P 500 and Nasdaq Composite closed lower on Wednesday, notching their worst days since 2022.

The broader market index slipped 2.31% to settle at 5,427.13, while the tech-heavy Nasdaq lost 3.64%, closing at 17,342.41. The Dow Jones Industrial Average fell 1.25%, or 504.22 points, and finished at 39,853.87.

— Lisa Kailai Han

Commodity prices could recover in the near future, UBS says

UBS believes the outlook for commodities looks good despite near-term demand concerns.

"Concerns over sluggish Chinese demand have weighed on commodity prices in recent weeks," the bank wrote in a Wednesday note. "However, we continue to see higher commodity prices ahead due to solid demand and limited supply, and we expect the asset class to deliver strong diversification benefits in a portfolio context."

Specifically, the bank believes lower crude exports could help tighten the oil market. Copper prices have also held up well, while UBS believes gold also has more room to rally.

"Gold took a breather after hitting a new all-time high last week, but the drivers for the rally remain in place, including strong central bank buying, ongoing geopolitical uncertainty, and the likely Federal Reserve move to cut interest rates in the coming months," the bank wrote.

— Lisa Kailai Han

Lamb Weston says consumers are still adding fries to meals, but traffic is slowing

Though frozen potato supplier Lamb Weston said consumers are cutting back on eating out, they are still opting for a side of fries when they do.

The Idaho-based company said the so-called fry attachment rate — or the share of customers who add fries with meals at restaurants — has shown little movement. That comes despite broader concerns about cracks in the consumer.

"While global restaurant traffic trends were mixed, fry attachment rates in the U.S., Europe, Japan and China were largely steady," CEO Thomas Werner told analysts Wednesday.

Even though consumers are still splurging for the iconic side, the company said slowing traffic at restaurants as customers belt tighten has hurt the business. Lamb Weston missed estimates from analysts polled by FactSet on both lines in the fourth fiscal quarter, sending shares down more than 27% in Wednesday's session.

If that holds through the closing bell, it will mark the stock's worst day ever. Shares are now down more than 47% on the year.

— Alex Harring

Here's how the market is trading Democrat election news so far, according to Wolfe Research

With policies under a Harris versus Biden administration shaping up to be quite similar, the market already seems to be reacting to Democrat election news, according to Wolfe Research.

"Combining the messages from just the last two trading days and cumulative performance of Democrat news YTD, energy and consumer stocks appear to be losers and lower inflation expectations seem to be boosting tech," chief economist Stephanie Roth wrote.

She added, "Interestingly, although China didn't meaningfully underperform on Trump days, it has outperformed on Democrat days."

— Lisa Kailai Han

'Magnificent Seven' earnings misses could mean a faster rotation, Strategas says

This earnings season, the technology, financials and health-care sectors are expected to be the biggest contributors. But now, the earnings of these megacap tech titans have come under more scrutiny than ever, according to Strategas.

"One of the fastest ways for a rotation to occur under the surface would be earnings misses for the magnificent seven," the firm wrote in a recent note. "We have talked about for some time how eventually 'AI Enthusiasm' will turn to 'AI Disappointment.' The next two weeks will be pivotal."

Indeed, the major stock indexes were trading lower on Wednesday, weighed down by weaker-than-expected results from Tesla, which dragged the stock down more than 8%. Declining YouTube advertising revenue also sank Alphabet shares more than 4% on Wednesday.

— Lisa Kailai Han

High tech valuations contributed to sharp corrections this earnings season, investor says

The major stock averages were lower on Wednesday, weighed down by an earnings miss from Tesla and disappointing YouTube advertising revenue from Alphabet.

William Northey, investment director at U.S. Bank Asset Management Group, believes high valuations and pressure are to blame, despite an overall economic environment that still looks strong.

"As we are still in the front half of earnings season, estimates for the full year continue to rise, which underscores the fact that this remains a healthy corporate performance and corporate earnings environment," Northey told CNBC in an interview. "That said, we have seen a couple of areas of high expectations potentially not being met and when valuations are as high as they have moved to in recent quarters, that can lead to sharp corrections in individual companies who miss estimates."

— Lisa Kailai Han

Buy Ford, KKM Financial CEO says

Investors should buy Ford on the market's dip, according to Jeff Kilburg, CEO of KKM Financial.

"It has lagged GM," he said on CNBC's "The Exchange." But he said the stock offers "value" after being "cut in half" over the past three years.

Kilburg noted the stock is above its 50-day and 200-day moving averages and could touch $15 in the short term. That would reflect upside of around 8.5% from Tuesday's close.

He said it is important to listen to commentary around the electric vehicle business given challenges, but strength in parts of the truck business can help boost shares. The carmaker reports earnings after the market closes on Wednesday.

Ford shares have dropped nearly 1% on Wednesday ahead of the report. The stock has added more than 12% so far in 2024, lagging GM's gain of more than 28%.

— Alex Harring

HSBC says market breadth 'a poor timing signal'

HSBC believes the broadening market rally should continue over the next few months. It noted that breadth is not necessarily a good timing indicator for the market.

"The common belief is that poor breadth is a warning signal for future performance. We find no evidence for that. If anything, poor market breadth often precedes better short-term performance," chief multi-asset strategist Max Kettner wrote in a Tuesday note.

Kettner noted that while he believes the broadening rally will remain a trend, he does not see a complete rotation away from the technology and artificial intelligence play.

— Hakyung Kim

Wall Street says Tesla report lacked 'razzle dazzle'

Wall Street is bracing from more disappointment ahead for Tesla shareholders following a second-quarter earnings report that lacked "razzle dazzle."

Read more on what analysts said about the electric vehicle giant's earnings miss and margin decline here.

— Samantha Subin

3 out of every 4 Nasdaq 100 stocks trade lower as tech struggled

Around 3 out of every 4 stocks in the Nasdaq 100 tracked for losses on Wednesday, underscoring the hit to technology names.

The concentrated, technology-focused index tumbled around 3% in the session. It was led down by Tesla and Trade Desk shares, which both slipped more than 10%. Tesla's drop comes after the electric vehicle maker's earnings per share fell short of Wall Street's expectations.

While the majority of members struggled in the session, others were able to buck the trend. Notably, CoStar Group was the best-performing member in the session, with a gain of more than 6% on the back of stronger-than-expected earnings.

— Alex Harring

NYSE decliners lead advancers nearly 2-1

The number of declining stocks at the New York Stock Exchange was nearly double of those ascending as the market sold off. Overall, more than 1,700 NYSE-listed stocks were lower, while 927 were advancers, according to FactSet.

— Fred Imbert

Stocks making the biggest moves midday

Here are the stocks on the move midday:

• Lamb Weston — The potato and french fry company tanked 27% after issuing a disappointing report for the fiscal fourth quarter. Lamb Weston generated adjusted earnings of 78 cents per share on $1.61 billion of revenue. Wall Street analysts were looking for $1.26 per share in earnings on $1.70 billion of revenue, according to FactSet. Lamb Weston also said it expected the new fiscal year to be "challenging."
• Tesla — The electric vehicle maker tumbled more than 10% after the company's earnings for the second quarter came in weaker than expected. Tesla did beat expectations on revenue, however, posting $25.5 billion compared to the consensus estimate of $24.77 billion, per LSEG. Shares of EV rivals Rivian Automotive and Lucid fell in sympathy, dropping more than 6% and nearly 4%, respectively.
• Enphase Energy — The solar energy company surged around 11% after posting third-quarter guidance that was stronger than expected. Enphase anticipates revenue between $370 million and $410 million, while analysts polled by LSEG expected $404 million.

Read the full list here.

— Sean Conlon

13 stocks in the S&P 500 notch new 52-week highs

Thirteen stocks in the S&P 500 hit new 52-week highs during Wednesday's trading session.

Of these names, eight stocks were trading at new all-time highs. These tickers included:

• NVR, Inc. trading at all-time-high levels back to postbankruptcy initial public offering in November 1993
• Arthur J. Gallagher trading at all-time-high levels back to its IPO in June 1984
• Fiserv trading at all-time-high levels since its IPO in September 1986
• Lockheed Martin trading at all-time-high levels back to the merger of Martin Marietta and Lockheed in 1995
• Pentair trading at all-time highs back through our history to 1972
• Packaging Corp. of America trading at all-time highs back to its IPO in 2000
• Welltower trading at all-time-high levels back to its incorporation as a Health Care REIT in 1985
• Atmos Energy trading at all-time-high levels back to the Energas spinoff from Pioneer Corp. in 1983

Six stocks were trading at their 52-week lows: Lululemon, Las Vegas Sands, Ulta, Lamb Weston, American Airlines Group and UPS.

— Lisa Kailai Han, Christopher Hayes

Lamb Weston on track for worst day ever

Following a fiscal fourth-quarter earnings miss, shares of Lamb Weston fell 26% on Wednesday and were on pace for their worst day since their initial public offering in November 2016.

The french fry producer was the worst performer in the S&P 500. The stock is now down 31.1% on a monthly basis, and on track for its worst month since March 2020.

Besides reporting that revenue and net income had declined year over year, Lamb Weston also posted earnings guidance for its next fiscal year well below analysts' consensus.

— Christopher Hayes, Jesse Pound, Lisa Kailai Han

Wednesday retreat doesn't threaten bull market, technical strategist says

Wednesday's leg down shows investors are still moving away from megacap technology and are readying for seasonal weakness that typically accompanies the fall, according to Larry Tentarelli, chief technical strategist of the Blue Chip Daily Trend Report.

But investors don't need to fear a conclusion to the bull market, he said.

"The big thing here is seasonality and that rotation, but I don't think this is the end of the bull market," he said. "I just think it's a regular pullback right now." 

— Alex Harring

Nasdaq heads for worst day since October

The Tesla- and Alphabet-induced sell-off has dragged the Nasdaq Composite lower by 2.3%. That puts the index on track for its worst one-day decline since Oct. 25, 2023, when it shed 2.4%.

— Fred Imbert

New home sales miss forecast

New home sales came in lighter than expected for June, continuing a trend of declines for the housing market, according to a report Wednesday.

Sales of new single-family homes totaled a seasonally adjusted 617,000, down 0.6% from the upwardly revised May rate of 621,000. Economists surveyed by Dow Jones had been looking for 640,000.

Despite the drop in sales, the median new home price increased to $417,300, the highest since March, while the average price declined to $487,200, the lowest since January 2023.

— Jeff Cox

Manufacturing sector hits six-month low, flash PMI reading says

Manufacturing in July unexpectedly slipped into contraction as new orders, production and inventories declined, according to an S&P Global flash reading of purchase managers.

The U.S. PMI flash manufacturing output index fell to 49.5, down from 52.1 in June and a six-month low. Economists surveyed by Dow Jones had been looking for a reading of 51.5.

That reading came despite a robust services index, which at 56.0 hit a 28-month high, up from 55.3 in June and better than the forecast for 55.0.

The indexes measure the percentage difference between companies reporting expansion against contraction. A reading above 50 means expansion.

— Jeff Cox

Copper futures hit lowest level since April

Copper's September-dated futures were trading at a low of $4.133 per pound Wednesday morning, marking their lowest level since April 3, 2024, when they traded at $4.069 per pound.

Copper futures are now on pace for their eighth straight negative session. This would mark their longest downside streak since February 2020, when the metal slipped for 13 days in a row.

— Nick Wells, Lisa Kailai Han

Stocks open lower following disappointing tech earnings

The major stock averages opened lower on Wednesday morning.

The S&P 500 lost 0.9%, while the Nasdaq Composite fell 1.5%. The Dow Jones Industrial Average declined 152 points, or 0.4%.

— Lisa Kailai Han

Lamb Weston slides after earnings miss

Shares of Lamb Weston Holdings dropped 18% in premarket trading after the french fry producer reported that revenue and net income declined year over year.

Lamb Weston said it earned an adjusted 78 cents per share on $1.61 billion of revenue in its fiscal fourth quarter. Analysts surveyed by FactSet had penciled in $1.26 in earnings per share on $1.70 billion of revenue.

The company's earnings guidance for the next fiscal year also came in below expectations.

"The operating environment has changed rapidly over the past twelve months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic," Lamb Weston president and CEO Tom Werner said in a press release.

— Jesse Pound

Stocks making the biggest moves premarket

Check out some of the companies making headlines in premarket trading:

• Alphabet — Shares of the Google parent company slipped nearly 4% before the opening bell. Advertising revenue in Alphabet's YouTube segment undershot expectations in the second quarter and overshadowed results that beat analysts' estimates on the top and bottom lines.
• Tesla — Stock in the electric vehicle company sank about 9% after second-quarter earnings were weaker than expected. Tesla's revenue of $25.5 billion came in above Wall Street estimates, which forecast $24.77 billion.
• Texas Instruments — Stock in the chipmaker ticked up about 2% due to better-than-expected second-quarter earnings. Texas Instruments reported earnings of $1.22 per share while analysts polled by LSEG expected $1.17.

Read the full list here.

— Brian Evans

Earnings expectations are too high, says Goldman's Rubner

Goldman Sachs tactical specialist Scott Rubner highlighted Wednesday just how high expectations are around this earnings season.

"The bar for earnings of the most important companies on planet earth is too high. Earnings and guidance must be good, and by good, I mean great," Rubner wrote.

Indeed, investors punished Tesla after the company reported weaker-than-expected results, sending shares down more than 7%. Google parent Alphabet beat earnings and revenue expectations, but its YouTube ad sales fell short of expectations, sending the stock down 4%.

— Fred Imbert

Seagate Technology stock rises on latest quarterly earnings beat

Shares of Seagate Technology were trading nearly 5% higher in Wednesday's premarket trading session after the data storage company reported better-than-expected results for its latest quarterly earnings.

Seagate posted earnings per share of $1.05 on revenue of $1.89 billion, while analysts polled by LSEG had only expected earnings of 75 cents on revenue of $1.887 billion.

— Lisa Kailai Han

Texas Instruments shares rise on earnings beat, solid guidance

Shares of Texas Instruments edged 1.8% higher in premarket trading on the heels of its better-than-expected financial report posted after Tuesday's market close.

The chipmaker posted $1.22 in earnings per share, exceeding analysts' consensus estimate of $1.17 per share, per LSEG. Revenue of $3.82 billion was in line with expectations. The company also posted in-line guidance, reassuring investors that orders could begin to pick up as excess inventory dies down.

— Pia Singh

AT&T shares rise as subscriber additions exceed expectations

AT&T shares rose more than 3% in Wednesday's premarket as subscriber addition numbers overshadowed earnings.

The telecommunications giant reported $29.8 billion in revenue for the second quarter, under the consensus estimate of $29.92 billion from analysts polled by LSEG. Earnings per share came in line with Wall Street expectations at 57 cents.

But the company's unlimited plans, which are typically less expensive than competitors', appeared to win and retain customers at a time of belt tightening. AT&T said it added 419,000 wireless phone subscribers paying monthly bills, well above the forecast from analysts surveyed by FactSet. Churn was also considered historically low.

— Alex Harring, Reuters

Tesla records fourth straight earnings miss

Tesla posted weaker-than-expected earnings on Tuesday, marking the electric vehicle maker's fourth straight earnings miss — the first time for the company.

Earnings came in 17% below consensus in the second quarter, which was its largest earnings miss since January 2021.

Gross margins for Tesla fell to 14.6% in the latest quarter, down by half from 30% in the first quarter of 2022.

— Hakyung Kim

Stocks making the biggest moves after hours

Check out the companies making headlines in extended trading:

• Alphabet — The tech giant slipped 1% despite a beat on both top and bottom lines in the second quarter. Alphabet earned $1.89 per share on $84.74 billion in revenue. Consensus estimates had called for earnings of $1.84 per share on $84.19 billion in revenue. However, revenue at its YouTube advertising segment missed forecasts.
• Tesla — Shares of the electric vehicle maker declined 4.7% after second-quarter earnings missed consensus estimates. Tesla reported adjusted earnings per share at 52 cents, while analysts surveyed by LSEG had called for 62 cents per share. On the other hand, the company posted $25.5 billion in quarterly revenue, which was slightly higher than the $24.77 billion estimated by the Street. 
• Visa — Shares slipped more than 2% after the company posted a revenue miss in its fiscal third quarter. Visa reported $8.9 billion in revenue, which came in slightly below the $8.92 billion forecast by analysts polled by LSEG. Meanwhile, payments volume rose 7% in the quarter. 
• Seagate — Shares rallied more than 6% after Seagate posted an earnings and revenue beat in the fiscal fourth quarter. Seagate earned $1.05 per share, excluding items, on $1.89 billion in revenue. Analysts surveyed by LSEG had estimated it would earn 75 cents per share on revenue of $1.87 billion. The company cited an improving cloud environment for its stronger performance.

The full list can be found here.

— Hakyung Kim

Stock futures fall Tuesday

U.S. stock futures declined across the board Tuesday night.

S&P 500 futures fell 0.3%. Futures tied to the Nasdaq 100 and Dow Jones Industrial Average dropped 0.4% and 0.2%, respectively.

— Hakyung Kim