The Dow Jones Industrial Average plunged after Federal Reserve Chair Jerome Powell gave an inflation warning. Walt Disney popped on earnings. Tesla got hammered on a Wall Street call as other Magnificent Seven stocks like Nvidia and Apple were mixed.
A number of stocks attempted breakouts despite the negative action. Jackson Financial, TransDigm and Woodward all tested entries.
Fed Chair Powell Issues Inflation Warning
Stocks reversed lower in afternoon trading after Powell cast doubt on the future path of interest rates at the IMF Annual Research Conference in Washington, D.C.
"The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; we are not confident that we have achieved such a stance," he said.
Wall Street had become hopeful future rate hikes were off the table following last week's FOMC meeting. Meanwhile, Powell was forced to temporarily leave the stage after climate protesters interrupted his speech.
Also, demand at the Treasury's $24 billion 30-year bond auction was light Thursday. That caused a jump in Treasury yields ahead of Powell's remarks.
The likelihood of a Fed rate hike in December jumped to 14.5% from 9.6%, according to the CME FedWatch Tool.
Yields spiked. The 10-year Treasury note yield jumped 13 basis points to 4.64% while the 30-year vaulted 12 basis points to 4.78%. The 5-year yield popped 13 basis points to 4.66% while the 2-year rose 10 basis points to 5.03%.
Nasdaq Reverses As Bears Bite Small Caps
The tech-heavy Nasdaq reversed sharply lower, closing down 0.9%. Marvell Technology outperformed as it rose nearly 1.8% but ultimately failed to recapture its 50-day line. Warner Bros. Discovery also starred with a 2.6% lift.
The S&P 500 fell for the first time in nine sessions as it skidded 0.8%. Becton Dickinson was among the worst S&P laggards, closing down 9.3%. The medical technology firm fell on weak fiscal 2024 sales and earnings guidance.
The S&P 500 sectors all closed in negative territory. Industrials and energy gave up the least ground on the stock market today. Health and consumer discretionary were the worst performing areas.
Small caps were given the worst mauling by the hungry bears, with the Russell 2000 plunging 1.6%. Growth stocks fared better though, with the Innovator IBD 50 ETF down 0.3%.
Dow Jones Today: Disney Earnings Boost Stock
Dow Jones industrials ended the day near session lows as it fell 220 points, or 0.7%.
Walt Disney stock was the clear top performer after it popped 6.9% following its latest quarterly report. It was its best day since Dec. 11, 2020, when it jumped 13.6%.
Disney earnings beat views, and the Disney+ streaming service ended the quarter with a total of 150.2 million subscribers, coming in above forecasts of 148.7 million.
The House of Mouse also raised its ambitious cost-restructuring targets. It is now looking to achieve $7.5 billion in cost reductions compared to its previous target of $5.5 billion.
DIS stock is now up 1.5% for the year so far and its test in coming sessions will be to reclaim its 200-day moving average.
At the other end of the spectrum, Amgen and Home Depot were the worst performers on the Dow Jones today. AMGN fell 3.4% while HD dipped 2.7%.
Magnificent Seven: Tesla Stock Dives After This Call
Tesla stock fared worst out of the Magnificent Seven today. HSBC issued a negative research note on the EV maker. Analyst Michael Tyndall initiated coverage of TSLA with a "reduce" rating, the equivalent of a sell.
While he sees "considerable potential" in the firm, he believes the timeline to making good returns is "likely to be longer than the market and valuation is reflecting."
TSLA stock closed off lows for the day but still fell 5.5% and tumbled back below its 200-day moving average. It remains up more than 90% so far this year.
Nvidia fared best out of the so-called Magnificent Seven, rising 0.8%. It briefly rose above a double-bottom entry of 476.09 but faded, MarketSmith analysis shows.
Meta Platforms squeezed out a 0.2% lift. Microsoft and Apple both fell fractionally. AAPL fell 0.3% and sits above its 50-day moving average but is well shy of a 198.23 entry while MSFT lost 0.7% but remains in a buy zone above a 346.20 entry.
Google parent Alphabet fell 1.2% while Amazon.com dipped 1%.
What To Do As Market Pulls Back; Nvidia, Tesla At Key Levels
Outside Dow Jones: Three Stocks Test Entries
It was not all negative on the stock market today, though. A number of stocks tested buy points from proper bases.
Jackson Financial closed in a buy zone after it cleared a cup-with-handle entry of 41.60. It rose 12.2% after beating earnings views. But while it is in the top 9% of stocks in terms of price performance over the last 12 months, its EPS Rating of 19 is poor.
TransDigm is in a buy zone after a 8.7% gain saw it clear a flat base entry of 940. The aircraft components maker soared after fourth-quarter earnings and revenue beat analyst views. The relative strength line hit fresh heights for TDG, which is a bullish sign.
Woodward also saw its RS line jump as it cleared a flat base buy point of 133.15 for a while, though it closed just below this level. Earnings are due in seven days.
An approach highlighted by Investor's Business Daily is to use options as a strategy to reduce risk around earnings. It's a way to capitalize on the upside potential of a stock's move around earnings, while reducing the downside risk.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
