The Dow Turned Lower: Tech Stocks Fall Ahead of Mag 7 Earnings Reports

The Dow Jones Industrial Average (DJIA) turned lower on Wednesday, January 30, 2025, as tech stocks fell ahead of the upcoming earnings reports from the so-called "Magnificent 7" companies. The DJIA fell for a tenth straight session, its longest daily losing streak in 50 years, as investors grappled with the impact of political events and market noise on Big Tech and insurance stocks.



The DJIA's decline was driven by the sharp drop in UnitedHealth Group's (UNH) stock price following the killing of its CEO and the underperformance of Nvidia (NVDA), a newly added component to the index. UNH shares lost more than 20% of their value in the nine sessions after December 4, 2024, putting renewed focus on the business of healthcare in America and leading to legislative proposals and presidential vows to address the industry's practices. Nvidia, which joined the DJIA in early November 2024, has fallen in all but one trading session since December 4, 2024, possibly weighed down by reports of an anti-monopoly investigation in China and the ascent of competitor Broadcom (AVGO).



The earnings reports of the "Magnificent 7" companies (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms) have a significant impact on the broader market due to their substantial weight in the S&P 500 index. These companies account for 28.6% of the index's total market capitalization and are expected to bring in 19.5% of the index's total earnings in 2024. For the fourth quarter of 2023, the group has a bigger weightage, bringing in 23.1% of all S&P 500 earnings (Zacks Investment Research).

Among these companies, Microsoft, Apple, and Meta Platforms are most likely to influence the Dow's trajectory due to their inclusion in the DJIA. Microsoft is expected to post substantial earnings growth of 6.5% and revenue growth of 10.8% in the to-be-reported quarter, while Apple is expected to report quarterly earnings per share (EPS) of $2.35 on revenue of $124.3 billion, implying year-on-year revenue growth of 3.8% and earnings growth of 2.35%. Meta Platforms is expected to report substantial year-over-year earnings growth of 29.5% and revenue growth of 17.1% (Zacks Investment Research).



Investors should maintain a balanced view by focusing on the fundamentals of these companies and ignoring short-term noise and political events that may not significantly impact their long-term performance. While political events and market noise can cause short-term volatility in Big Tech and insurance stocks, their long-term performance is more influenced by fundamental factors. By maintaining a long-term perspective, investors can ignore short-term noise and political events that may not significantly impact the companies' long-term performance.

In conclusion, the DJIA turned lower on Wednesday, January 30, 2025, as tech stocks fell ahead of the upcoming earnings reports from the "Magnificent 7" companies. The decline was driven by the sharp drop in UnitedHealth Group's stock price and the underperformance of Nvidia. Investors should maintain a balanced view by focusing on the fundamentals of these companies and ignoring short-term noise and political events that may not significantly impact their long-term performance.