Stocks took a significant hit on Wednesday as the market grappled with mixed earnings reports from tech giants Microsoft and Alphabet. The Dow Jones Industrial Average fell by a modest 0.3%, while the benchmark S&P 500 tumbled almost 1.5%. However, the tech-heavy Nasdaq Composite experienced its worst day in eight months, dropping nearly 2.5%. Both the S&P 500 and Nasdaq closed at their lowest levels since May.

Investors were particularly disappointed by Alphabet's performance, as the Google parent company's shares slid more than 9% after beating earnings and revenue expectations but falling short in its cloud business. On the other hand, Microsoft's stock stood out as a rare bright spot, surging 2% following its double beat, which demonstrated the success of its artificial intelligence (AI) investments in the cloud segment.

The mixed earnings results from these tech giants dampened some of the enthusiasm surrounding Big Tech stocks that have been driving the market's gains throughout the year. Shares of Amazon and Facebook parent company Meta both saw losses exceeding 4%.

Tech stocks have been grappling with growing pressure from surging Treasury yields. The 10-year yield climbed above 4.9%, while the 30-year yield advanced above the 5% mark. These rising bond yields further exacerbated the sell-off in tech stocks.

The Nasdaq Composite's dismal performance on Wednesday marked its worst single-day drop since February. This downward move pushed the index into correction territory, which is defined as a decline of more than 10% from its recent high on July 19.

In terms of trending tickers, Alphabet stock led the pack on Wednesday, with shares falling over 9% due to a sequential slowdown in cloud revenue during the third quarter. Amazon's stock also fell by more than 5% amid concerns over cloud spending and the broader market sell-off. The Nasdaq Composite itself entered the list of trending tickers as it entered correction territory.

Analysts highlighted the challenging nature of the current earnings season. After analyzing 128 S&P 500 companies that reported earnings, it became apparent that positive earnings announcements failed to generate significant price reactions. On average, companies that exceeded expectations for both earnings per share and revenue saw only a 0.3% increase in stock price the following day. This is a notable decline compared to the 1% increase seen over the past five years. Furthermore, companies that missed expectations on both the top and bottom line experienced an average decrease in stock price of nearly 5%. This downward move is significantly higher than the 3.1% decline seen over the past five years.

Meanwhile, the automotive sector saw activity as the United Auto Workers (UAW) edged closer to reaching a deal with Ford. This development comes after a six-week-long strike. The potential agreement includes a 25% general wage increase, slightly higher than the previously offered 23% increase. Shares of all three major American automakers rose on the news.

The S&P 500 faced a significant dip below its 200-day moving average, decreasing below 4200 on Wednesday afternoon. This level had previously acted as support during the recent market downturn. Truist co-CIO, Keith Lerner, highlighted the possibility of a temporary downside overshoot below this level, with the next support level for the S&P 500 estimated to be around 4050.

Boeing also made headlines as it revised its forecast for the 737 Max, resulting in a slightly above-flat line performance for its shares. The aerospace company reported top-line revenue of $18.10 billion for the quarter, missing the Street's estimate of $18.16 billion. Boeing attributed the impact to unfavorable defense performance and lower 737 deliveries. Despite these challenges, Boeing remains confident in meeting its financial goals for the year and maintaining its cash flow guidance.

In a surprising move, Apple raised the prices of several of its subscription services in select international markets and the United States. Apple TV+ now costs $9.99, up from $6.99, while Apple Arcade and Apple News+ saw price increases of $2 and $3, respectively. The subscription bundle, Apple One, also experienced price hikes. Existing subscribers will face these increases 30 days after their next renewal date.

The divergent earnings reports from tech giants Alphabet and Microsoft emphasized the importance of artificial intelligence (AI) in driving growth within the businesses. While Google exhibited a slowdown in cloud revenue, Microsoft's cloud segment experienced growth thanks to its emphasis on AI. This contrast led to a stock surge for Microsoft and a decline for Alphabet.

Overall, the market faced significant volatility on Wednesday due to mixed earnings and rising bond yields, with tech stocks taking the hardest hit. Investors await further quarterly reports to assess the overall health of the market and identify catalysts for a potential breakout from the recent sell-off.