Chipotle (CMG) stock rose more than 12% in after-hours trading after the burrito seller posted second quarter earnings that came in better than Wall Street expected. Chipotle's comparable sales rose 11%, above Wall Street's estimates for a 9% increase.

Ford (F) stock fell about 10% after the company slashed its profit outlook for its "Blue" division and reported lower earnings per share for the prior quarter than expected.

The S&P 500 (^GSPC) declined 2% on Wednesday, marking the worst day for the benchmark index in more than a year. The sell-off was largely driven by tech.

Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL, GOOG), Meta (META), Nvidia (NVDA), and Microsoft (MSFT) were all off at least 2.5% on Wednesday. Nvidia, Meta, and Alphabet were the worst performers among the group, with shares of each down about 5%.

Meanwhile, Tesla (TSLA) sank more than 11% after its latest quarterly earnings report fell short of Wall Street's expectations.

In aggregate, the Magnificent Seven tech stocks lost more than $750 billion in market cap on Wednesday, the worst day on record for the group.

Former New York Federal Reserve president Bill Dudley is reversing course on his Fed call.

Dudley, who had been sitting in the self-proclaimed "higher-for-longer camp," wrote in a Bloomberg opinion column on Wednesday the Fed should "preferably" cut interest rates at its policy meeting next week.

"The Fed’s efforts to cool the economy are having a visible effect," Dudley wrote.

Dudley cites declining pandemic-era savings among non-wealthy consumers and a deteriorating labor market picture as reasons the Fed should start cutting now. Specifically, Dudley notes, the recent increase in the unemployment rate could be a point of concern.

"Historically, deteriorating labor markets generate a self-reinforcing feedback loop. When jobs are harder to find, households trim spending, the economy weakens and businesses reduce investment, which leads to layoffs and further spending cuts," Dudley wrote.

Dudley isn't the only economist to highlight a cooling labor market as a reason for the Fed to begin cutting soon. Renaissance Macro's Neil Dutta has been arguing it's time for the Fed to "get on with it" and cut rates before labor market conditions worsen too far.

Goldman Sachs chief economist Jan Hatzius argued similarly in volume three of Yahoo Finance's Chartbook.

"In the jargon of labor economics, we have moved down the steep post-pandemic Beveridge curve and are back to the flatter pre-pandemic Beveridge curve," Hatzius wrote. "This means we may be approaching an inflection point at which further softening in labor demand results in a bigger and much less welcome increase in unemployment."

Hatzius has argued this adds to the case for the Fed to cut at its July meeting.

The Federal Reserve is widely expected to cut interest rates ahead of the November election. But that might not matter when it comes to who wins.

"It shouldn't matter much," Nobel Prize-winning economist Paul Krugman told Yahoo Finance on Wednesday, noted the lagged effects policy has on the real economy. "What the Fed does today shouldn't affect the real economy for quite a few months, not until well after the election."

Trump has publicly expressed his view that the central bank should not cut rates before the election, as it would provide a boost to the economy and, therefore, the political party in office.

In an interview with Bloomberg last month, the former president said the Fed cutting rates ahead of November is "something that they know they shouldn’t be doing."

But markets are pricing in a different reality, predicting a nearly 100% chance the Federal Reserve cuts interest rates at its September meeting, according to data from the CME Group. That's up from about a 68% chance just one month ago.

Cooler readings on inflation and an uptick in the unemployment rate have helped fuel a narrative that the central bank should cut rates sooner than later. It's possible the central bank could cut rates as soon as next week, although markets are more bullish on a September start to the Fed's easing cycle.

"Concretely, if you asked what impact ... the Fed does have on the unemployment rate on Election Day? The answer is margin of error, nothing there," Krugman said. "If you ask what effect it might have on how people feel about the economy? It might make a big difference."

In other words, a rate cut could impact sentiment and "the narrative might change."

"I think one of the things that we've learned in the past couple of years is that consumer perceptions of the economy don't very closely follow the traditional variables," Krugman said. "If [the Fed] cuts, that's a prestigious voice saying, 'We're not worried about inflation anymore,' which might affect things."

The CBOE Volatility Index, known by its ticker as simply the VIX (^VIX), shot to its highest level since April amid a broader market sell-off on Wednesday.

As DataTrek co-founder Nicholas Colas recently highlighted in Yahoo Finance's chartbook, low volatility is typically a feature of bull markets. Still, as the past year of market action has shown, sell-offs still come in bull markets and often coincide with volatility spikes. This was exemplified in Wednesday's market action, the recent April pullback, and last fall's drawdown.

And as Colas noted in a research note on Monday, usually, stocks don't bounce back until volatility settles back down.

"The last 12 months of history suggests waiting for the VIX to hit a close of 19.2 - 21.7, right around its long-run average of 19.5, before looking for an entry point in US large caps," Colas wrote on Monday. "If you believe markets are in for a rougher than usual slog, then the VIX level to watch is 27 (1 standard deviation above the long run mean)."

Keeping it real.

Seana Smith and yours truly caught up with Otis (OTIS) CEO and Caterpillar (CAT) board member Judy Marks today on a range of topics.

But it was what the Business Roundtable member told us on the tariff topic that was most interesting. Keep in mind Trump has floated a 10% universal tariff and possibly a tougher stance on China (big markets for Otis and Caterpillar).

Said Marks:

"I think tariffs impact the American economy. They impact the American citizen no matter what they buy. We've seen that since tariffs have continued to go up regardless of which party wins. We need a pro-growth environment that allows us businesses that are multinational businesses to operate in a high-quality trade environment that everyone understands. So that we can compete and when we can compete overseas, it drives additional economic growth and jobs here in the US, and that goes across all industries.

A tariff war is not in the American economy's best interests, nor in our citizens' best interest. When it's going to create imbalance, it's going to potentially create other issues for American companies to continue to either export or to grow our businesses. And all we want is a pro-growth environment that allows us to continue to make a difference for the lives of Americans."

Full watch below.

One of the trustiest meals in American culture is on the outs.

Potato giant Lamb Weston (LW) saw its stock fall more than 25% on Wednesday after reporting results before the bell that showed profits and sales falling short of estimates in its fiscal fourth quarter while the company slashed its full-year forecast.

CEO Tom Werner said in a statement the company was "disappointed" by its performance in its fiscal fourth quarter, which ended May 26.

"We expect fiscal 2025 to be another challenging year," Werner added.

"The operating environment has changed rapidly over the past 12 months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic."

Lamb Weston stock also took a dive after its third quarter earnings report back in April and the stock is now down nearly 50% in 2024.

On a conference call with analysts, Werner more specifically called out burger-focused fast food chains as a source of weakness, noting that traffic at these restaurants fell 4% during the most recent quarter and declined sequentially during each month of the quarter.

Werner did call out new value menus rolled out from companies including McDonald's (MCD) and Burger King (QSR) as developments that have the company "encouraged" about driving traffic in the months ahead. Still, the company said it hasn't yet seen any impacts from these promotions on traffic trends.

The company also said it saw the "fry attachment rate" — or how often consumers add fries to an order — as "largely steady," suggesting the problem for Lamb Weston is more around the category rather than the product.

Last month, McDonald's rolled out a $5 meal deal in a promotion set to run through August. Burger King rolled out a similar promotion back in May.

Alphabet (GOOG, GOOGL) stock slipped more than 4% on Wednesday as investors kept a close on the company's increased AI spending while disappointing YouTube advertising revenue was also a pain point for investors after the Google parent's latest quarterly release.

Yahoo Finance's Dan Howley reports:

Google parent Alphabet (GOOG, GOOGL) reported its fiscal second quarter earnings after the bell on Tuesday, beating analysts' estimates on the top and bottom lines as its cloud businesses continue to pick up steam, topping the $1 billion mark for operating profit for the first time.

For the quarter, the company saw earnings per share of $1.89 on revenue of $84.7 billion. Analysts were anticipating earnings per share of $1.85 on revenue of $84.3 billion, according to data compiled by Bloomberg. That's a jump from the same period last year of 31% and 14%, respectively, when the company reported earnings per share of $1.44 on revenue of $74.6 billion.

Advertising revenue topped $64.6 billion versus analysts' expectations of $64.5 billion, and up from $58.1 billion last year. YouTube ad revenue, however, fell short, with the segment bringing in $8.66 billion versus expectations of $8.95 billion.

Google saw cloud revenue of $10.35 billion and operating income of $1.17 billion. That's better than analyst expectations of $10.1 billion and operating income of $982.2 million and higher than the $8 billion in revenue and $395 million in operating income the company reported in Q2 2023.

Alphabet shares are up 30% year to date. Shares of rivals Microsoft (MSFT) and Amazon (AMZN) are up 18% and 22% year to date, respectively. All three companies are pouring money into building out their generative AI capabilities, spending lavishly on data centers capable of powering the AI models they offer via their cloud service platforms.

In the second quarter, Alphabet reported spending $2.2 billion building AI models across its DeepMind and Google Research organizations. That's up from $1.1 billion in Q2 2023. When exactly AI starts to generate revenue for Google’s Cloud business, let alone its ad segment, is still up in the air.

“It is still too early to count on AI benefits as most [companies] remain in pilot mode, and material AI [revenue] is more likely a 2025-26 event,” Jefferies analyst Brent Thill wrote in a recent client note ahead of Alphabet's earnings announcement.

Tesla (TSLA) stock slid more than 10% on Wednesday morning as the company reported weaker profits than expected and warned its growth rate in 2024 would be "notably lower" than it achieved in 2023.

Yahoo Finance's Pras Subramanian reports:

For the quarter, Tesla reported Q2 revenue of $25.05 billion vs $24.63 billion expected, per Bloomberg consensus, slightly higher than the $24.93 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.52 vs. $0.60 expected, on $1.8 billion in non-GAAP net income.

"Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up," Tesla said in its Q2 earnings report.

Many analysts and industry watchers think the debut and release of a cheaper EV will spur the next leg higher of EV sales — something even Tesla CEO Elon Musk has said before.

On the earnings call, Musk said the company would reveal its robotaxi on Oct. 10, originally slated for Aug. 8. Musk said the extra time would allow Tesla to add "a couple other things" to the robotaxi prior to its unveiling.

Tesla said the robotaxi will feature the "unboxed manufacturing strategy" it's touted before.

Business activity grew in July at its fastest pace in 27 months, according to S&P Global's latest flash US composite PMI.

The composite PMI, which captures activity in both the services and manufacturing sectors, came in at 55 in July, up from 54.8 in June. Economists had expected the index to tick lower to 54.2.

Services drove the gains, with the index rising to a reading of 56, its highest in 28 months. Meanwhile, activity in the manufacturing sector declined, hitting a reading of 49.5, its lowest print in seven months.

A reading above 50 for these indexes represents expansion in the sector, while one below 50 indicates contraction.

Importantly, the surprise growth in activity came alongside lower price increases. Average prices charged for goods and services rose at the slowest rate since January, and the second-slowest rate since October 2020, according to S&P Global's report.

“The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the release.

Lackluster Alphabet (GOOGL, GOOG,) and Tesla (TSLA) earnings have stirred up worries that Big Tech's power to fuel stock gains is fading. EV maker Tesla's stock price slid almost 9% in morning trading, while Alphabet shares dropped about 5%.

This led to a sea of red in the Nasdaq on Wednesday, where other tech stalwart Nvidia (NVDA) was down more than 3%.

Not exactly a blowout quarter from AT&T (T) just crossing the wires – in-line earnings and a reiteration of guidance (which the Street may see as a letdown).

I caught up with AT&T CFO Pascal Desroches and asked him about the consumer weakness we are starting to hear being called out on earnings calls:

“We are probably a bit of a lagging indicator. We're not going to be the ones to first see weakness. When you look at the criticality of phone service, this is probably one of the last things a consumer is going to cut out,” Desroches told me.

He added that it looks like “consumers are hanging in there.”

And it's time to start guessing how huge Nvidia's (NVDA) quarter will be when it reports in a few weeks.

What Tesla (TSLA) CEO Elon Musk said about the chipmaker on his earnings call last night: