Some of the hottest S&P 500 stocks all year are headed the other way — and fast.
Six of the S&P 500's top stocks this year, including Tesla, Carnival and Advanced Micro Devices, crashed 20% or more from their highs in the past year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That puts them all in bear-market territory.
Such wealth-burning drops are a shock to investors. All of these suddenly plunging shares had been among the top stocks of the year — up more than 35%.
The reversals show how the threat of higher interest rates is shaking up the S&P 500. "It's dawning on Wall Street that despite a giant 'wall of worry', the Fed is probably going to have to resume raising rates," said analyst Edward Moya of Oanda.
Everything Changed In Late July
Late July is when the whole S&P 500 turned upside down. That's when the yield on the 10-year Treasury pushed above 4% — offering a compelling alternative to stocks and threatening corporate profits.
It's almost like someone instantly unplugged the 2023 stock party. Since July 31, the S&P 500 has dropped 6%. But it's actually worse than that if you look past the index. All but one of the 11 S&P 500 sectors dropped since late July. And the only sector that's up is energy, by 5.4%, and that's a play on inflation.
All this means the S&P 500 is getting uncomfortable, even for the former leaders. Now, nearly 380 stocks in the S&P 500, or more than three-quarters of the index, are down 10% or more from their 52-week highs.
Tesla's Big Fall
Even one of the year's favorite "Magnificent Seven" stocks, Tesla, fell from grace. And it's all about earnings.
The electric vehicle maker late Wednesday reported disappointing third-quarter results. The company's revenue and adjusted profit per share missed estimates by 3% and 10%, respectively.
And that's accelerated the stock's drop. Tesla's shares have now plunged nearly 27% from their 52-week high of 299.29 on July 19. That's a sudden reversal for one of the year's top stocks, though it's still up more than 78% this year.
But as rough as Tesla's drop is, it's not the most severe in the S&P 500.
Shares of cruise operator Carnival are down a crushing 40.8% from its 52-week high. That's a brutal comeuppance for a stock up nearly 44% this year. But the company is entering a seasonally slow period. Carnival is expected to lose 13 cents a share in the November quarter and another 10 cents a share in the February quarter. That's down from a profit of 86 cents a share in the August quarter.
Chip Stocks Falling Where They May
Even the rallying shares of semiconductor companies are starting to falter. Advanced Micro Devices is just one chipmaker seeing its shares fall back to earth.
AMD's stock is off 22% from its 52-week high notched on June 13. Investors are increasingly concerned about how semiconductors are turning into a point of contention for trade between the U.S. and China.
AMD's adjusted profit per share is seen dropping more than 21% in 2023. With that said, though, analysts think AMD's profit will soar more than 50% in fiscal 2024.
And that's the dilemma investors face. Are these big-time S&P 500 leaders just pulling back temporarily or are higher interest rates changing the math and market leadership? If Tesla is any guide, earnings season might provide some answers.
Big Drops In Top S&P 500 Stocks
| Company | Ticker | YTD % ch. | From high | Sector |
|---|---|---|---|---|
| Carnival | 41.3% | -41.8% | Consumer Discretionary | |
| Tesla | 77.5 | -27.0 | Consumer Discretionary | |
| Royal Caribbean Cruises | 66.4 | -27.2 | Consumer Discretionary | |
| Advanced Micro Devices | 58.0 | -23.0 | Information Technology | |
| Airbnb | 40.1 | -22.7 | Consumer Discretionary | |
| ON Semiconductor | 39.5 | -21.9 | Information Technology |
