The Dow Jones Industrial Average trimmed what was a 700-point loss by nearly half by the close Thursday as it sought to recover from an earnings-fueled drop courtesy of component Caterpillar, the worst performer among the Dow's 30 members. Other indexes also got hit as Facebook and Instagram operator Meta Platforms led techs lower, plunging as much as 16% on the stock market today.
At least seven other members of the Dow industrials slipped 2 points or more. However, index futures jumped after strong results from megacap techs Alphabet and Microsoft after the close. But Intel foundered on its Q1 results and issued a weaker-than-expected Q2 top-line forecast.
Nasdaq 100 futures initially indicated a 0.7% rise after the 4 p.m. ET close of the regular trading session, then accelerated to nearly a 1.2% rise.
Alphabet posted a big revenue beat at $80.54 billion, up 15% vs. a year earlier, and Q1 earnings surging 66% higher to $1.89 a share. The Google search engine and cloud computing provider announced a dividend and a big share buyback. Shares initially roared 9% higher in extended-hours trading. Microsoft rose more than 4% ahead of its conference call after posting earnings of $2.94 a share in the fiscal third quarter, smashing the FactSet consensus view of $2.63. Revenue climbed to $61.9 billion, well ahead of the $56.8 billion forecast and up 17% vs. a year earlier.
Meta trimmed its big loss to a still-heavy 10.6% at the close.
Meanwhile, some commodities rallied in the regular session. Gold futures erased small early losses and gained 0.3% to $2,345 an ounce. Silver added a nickel to $27.40 per ounce. Crude oil traded near $83.70 a barrel, jumping more than 1%.
Banking stocks within the IBD 50 also defied the market sell-off. Inside the IBD 50, Deutsche Bank and First Citizens BancShares led with gains of 8% to 9%. First Citizens reported Q1 earnings today that beat estimates. Deutsche Bank, rising 32% year to date, now holds a strong 98 Composite Rating but is now too far extended from its recent breakout from a base at 14.02.
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Elsewhere, water heater maker A.O. Smith (gapping down 4.8% to 82.82), cloud computing and AI play IBM (gapping down 8.3% to 168.91, a three-month low) and digital transformation enterprise software giant ServiceNow (also gapping lower, down 4% to 716.25) have all gotten hit by sellers in recent days. All three fell below their 50-day moving averages in heavy turnover following quarterly results. The sharp violation of this key technical level triggers a profit-taking sell rule.
ServiceNow found buyers near 700 and closed near the top of its intraday range. The flat base that had been forming, however, is now more than 15% deep from high to low, ruining that pattern for now.
The Dow Jones industrials plunged more than 2.3% in the early going but trimmed that loss to around 1% at the close. The blue-chip average has seen its 2024 gains wither to less than 1%.
In The Dow Jones: UnitedHealth Battling Higher
On Thursday, at least four of the Dow Jones' 30 components managed to rally 1 point or more. Defensive play UnitedHealth led the cause, gaining more than 6 points, or 1.3% to 493.86. It lies just 11% below a 52-week high. UNH is part of the IBD Long-Term Leaders list.
Other megacap techs also hurt the Nasdaq composite, which was off as much as 2% and cut below 15,400. Yet, the composite then chopped that loss to 0.6% by day's end.
Volume edged up less than 1% vs. Wednesday, early data showed. Also, the S&P 500 shaved its day's losses to almost 0.5%, finishing well above its intraday low of 4,990 when it was down more than 1.5%. NYSE volume rose more than 8%.
The Dow Jones transportation average, in contrast, rebounded 1.2%. This sector index got shellacked on Wednesday, sinking 2.3% amid dour earnings from the trucking sector, but has now recouped half of that day's loss.
IBD Big Picture: Why The Transport Stocks Sold Off
Small Caps Sell Off; Cost Of Money Jumps
Small caps sold off in weak action on the stock market today as investors also exited long-term U.S. government bonds. The Russell 2000 shrank an early 1.4% drop to 0.6% and closed almost at its intraday high.
New data on GDP showed the U.S. economy expanding at a 1.6% annualized rate in Q1, much lower than the 2.3% increase economists had forecast. And the core personal consumption expenditures (PCE) index, a favorite inflation measure of the U.S. central bank, came in at 3.7% for the first quarter vs. an estimate of 3.4%. These data points also sparked the early sell-off.
As noted in IBD, core PCE showed a much milder 2% rate in both Q3 and Q4 of last year.
The benchmark 10-year Treasury yield was up 5 basis points to 4.7%. The yield rose to as high as 4.73%. That's not far from a 52-week high of 4.99% set in October amid growing expectations that the Federal Reserve may wait until after the November U.S. elections before trimming short-term interest rates.
The CME FedWatch survey of bond traders shows that at the Sept. 18 Federal Reserve meeting on interest rates, the chances of at least a quarter-point cut in the fed funds rate from a current 5.25%-5.5% target range is slightly more than 60%.
The stock market now turns to focus on Friday's report on inflation, namely the personal consumption expenditures index, before the open.
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Stock Market Today: Meta Plunges
Meta's plunge through its 10-week moving average suggested that its heady run since the market bottom during the fourth quarter may be over for now. Meta last closed below this key technical level in the week ended Oct. 27. The Magnificent Seven stock initially broke out of a flat base in mid-March 2023, clearing an entry at 197.16.
Meta dropped as much as 16% today, but trimmed those losses to just above 10%. Volume soared to eight times its average pace over the past 50 sessions. Meta's softer-than-expected sales outlook for 2024 and plans to increase capital expenditures to infuse artificial intelligence into its digital ads and e-commerce initiatives led to the sell-off.
Stock Market Today: Other AI Stocks Rally
This plan actually is helping some AI-related names to rally, including Arista Networks, which was up 4% in heavy turnover but still hung beneath its flattened 50-day line. Also benefiting is data center maintenance expert Vertiv, up more than 6% after reporting its strong results Wednesday.
Caterpillar reported adjusted earnings of $5.60 a share, beating Wall Street's estimate by 46 cents. Operating margin rose 110 basis points to 22.2% vs. a year earlier. However, sales of $15.8 billion fell $200 million short of analyst forecasts. Caterpillar also noted the economy is softening in the key Asia-Pacific region, excluding China.
At one point, shares of Caterpillar plunged more than 9%, slicing through their 50-day moving average on the stock market today, triggering a sell rule. Caterpillar had made solid gains following a breakout past a proper buy point at 293.88.
The stock's 93 Relative Strength Rating means Caterpillar has outperformed 93% of all companies in the IBD database over the past 12 months. It's the second-best RS Rating within the Dow Jones, behind American Express with a 94.
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On the upside, Impinj led the day's stock market winners by gapping up powerfully. Shares of the specialist in radio-frequency-based semiconductor technology catapulted more than 28%. Volume cruised nine times higher than its normal level. The stock cleared a flat base with a 132 buy point in strong turnover. It's now extended past the 5% buy zone, which goes up to 138.60.
Impinj reported a 25% decline in first-quarter profit to 21 cents a share. Sales melted 11% to $76.8 million. Impinj's relative strength line marked new highs, triggering the blue dot on MarketSurge. This indicates supreme outperformance vs. the S&P 500 in the stock market.
Chipotle Mexican Grill also defied the drop on the stock market today. Shares surged 6% in heavy volume. The large-cap growth stock cleared resistance at 3,000 following another quarter of solid results. First-quarter profit rose 27% to $13.37 a share on a 14% sales jump to $2.7 billion.
Analysts have been ratcheting their Chipotle full-year profit estimates higher; they now see earnings rising 23% this year to $55.27 a share and up an additional 18% in 2024.
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