CNBC Daily Open: Wall Street sinks, Tesla slumps

This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

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Wall Street sinks
The S&P 500 and Nasdaq Composite had their worst day since 2022 due to lackluster earnings from two tech megacaps. The broader index dropped 2.3%, while the tech-heavy Nasdaq slid 3.6%, with the Dow Jones Industrial Average losing 504 points. Google-parent Alphabet experienced its steepest one-day decline since Jan. 31, falling 5% after YouTube advertising revenue missed estimates. Tesla shares dropped over 12%. Nvidia, Meta Platforms, and Microsoft also fell 6.8%, 5.6% and 3.6%, respectively. The yield on the 10-year Treasury rose, while U.S. oil prices rebounded from a three-day losing streak. 

Ford profit miss
Ford Motor shares plunged 11% in extended trading after the company missed Wall Street's second-quarter earnings expectations due to increased warranty costs. The automaker beat revenue estimates and raised its free cash flow target, but maintained its 2024 earnings guidance, disappointing investors. Ford reported adjusted earnings per share of 47 cents, falling short of the expected 68 cents, while automotive revenue reached $44.81 billion, surpassing the anticipated $44.02 billion.

Tesla dives 
Tesla shares plunged over 12% on Wednesday, their steepest decline since 2020, after the electric vehicle maker reported weaker-than-expected quarterly earnings and a further drop in automotive revenue. The decline in revenue, attributed to price cuts and incentives amid slowing sales and heightened competition, particularly in China, has dragged the stock down 13% so far this year, while the Nasdaq is up 16% over the same period.

NBA media rights
The National Basketball Association rejected Warner Bros. Discovery's attempt to match Amazon's $1.8 billion a year offer for media rights, opting instead to finalize a deal with Amazon. This ends a decades-long partnership with Warner Bros. Discovery and its cable network TNT. The NBA's decision is part of a broader $77 billion, 11-year media rights renewal, with Disney and Comcast's NBCUniversal securing the other two packages.

Asia markets slide
Japan's export-heavy Nikkei 225 fell 2.6%, extending a six-day losing streak, as investors pull back from global technology stocks. SoftBank Group and Renesas Electronics plunged 8.7% and 14.2%, respectively.  South Korea's Kospi dropped 1.5% as GDP grew less than expected. On a quarter-on-quarter basis, the economy shrank 0.2%. Index heavyweight SK Hynix dived 6% even as the company reported an all-time high quarterly revenue. Hong Kong's Hang Seng index fell 1.4% and mainland China's CSI 300 dipped 0.6%. China's central bank surprised markets by cutting rates to stimulate the economy. 

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During a recent earnings call, Tesla's CEO Elon Musk seemed more interested in discussing the company's autonomous future than addressing concerns about its legacy auto business.

"The value of Tesla overwhelmingly is autonomy. These other things are in the noise relative to autonomy," Musk said. Tesla is due to unveil its robotaxi in October, having pushed back the launch by two months. 

Tesla has slumped nearly 18% from its recent high in July. Wall Street analysts see more downside ahead especially after adjusted operating margin shrank to the lowest in three years amid declining auto sales.

"Any time the gap between what is reality and happening today versus what is in Musk's mind and going to happen in the future. When that gap widens out the stock comes under a lot of pressure," TD Cowen analyst Jeff Osborne told CNBC's "Squawk on the Street." Osborne has a price target of $180 on the stock, which is nearly 17% below Wednesday's close.

It was "unclear" how Tesla would "solve the automotive problem" with its structurally lower margins, Osborne said. "They didn't really touch that with a 10-foot pole on the call."

"It's unclear what the path forward is around any type of new vehicle to reinvigorate demand." 

As for Alphabet, CNBC's Samantha Subin writes investors in Google's parent should prepare for a volatile time ahead. While the company plans to spend $12 billion each quarter to prepare itself for an AI future, advertising revenues has been under pressure.  

The S&P 500 and the Nasdaq slumped following the disappointing numbers from Alphabet and Tesla.

"Usually in a bull market you do, now and again, get some sell-offs, and this is a nasty one, I think this is going to turn out to be an official correction in the Magnificent 7," Ed Yardeni of Yardeni Research told CNBC's "Closing Bell." 

"When you look at the underlying fundamentals of the economy, I don't think we are going to get an S&P-wide correction of 10% to 20% because I don't see a recession out there and I don't think investors are actually worrying about a recession, given that the Fed has basically  promised to lower interest rates if that is necessary and I don't see a bear market." 

But investor expectations are too high for this earnings season, Goldman Sachs tactical specialist Scott Rubner highlighted.

"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.

— CNBC's Fred Imbert, Lisa Kailai Han, Hakyung Kim, Lora Kolodny, Alex Sherman, Michael Wayland, Spencer Kimball and Lim Hui Jie contributed to this report.