The Dow Jones Industrial Average faced a significant decline following an inflation warning from Federal Reserve Chair Jerome Powell. Meanwhile, Walt Disney (DIS) experienced a notable boost in stock value after impressive earnings, contrasting with Tesla’s (TSLA) decline due to a negative Wall Street call. Other Magnificent Seven stocks like Nvidia (NVDA) and Apple (AAPL) displayed mixed performances.
The Dow Jones Industrial Average experienced a sharp decline following an inflation warning from Federal Reserve Chair Jerome Powell. In contrast, Walt Disney (DIS) saw a significant surge in stock value after delivering impressive earnings. However, Tesla (TSLA) faced a challenging day due to a negative Wall Street call. Other Magnificent Seven stocks, including Nvidia (NVDA) and Apple (AAPL), displayed mixed performances.
Despite the negative market action, several stocks attempted breakouts. Notably, Jackson Financial (JXN), TransDigm (TDG), and Woodward (WWD) all tested entry points.
Powell’s Inflation Warning: Stocks reversed lower in afternoon trading following Powell’s remarks at the IMF Annual Research Conference in Washington, D.C., where he expressed doubt about the future path of interest rates. Powell stated, “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.” Wall Street, which had been optimistic about future rate hikes being off the table after last week’s FOMC meeting, saw a shift in sentiment. Powell was temporarily forced to leave the stage after climate protesters interrupted his speech. Additionally, light demand at the Treasury’s $24 billion 30-year bond auction led to a jump in Treasury yields ahead of Powell’s remarks. The likelihood of a Fed rate hike in December increased to 14.5% from 9.6%, according to the CME FedWatch Tool. Yields spiked across various Treasury notes.
Nasdaq Reverses as Small Caps Face Bearish Pressure: The tech-heavy Nasdaq experienced a sharp reversal, closing down 0.9%. Marvell Technology (MRVL) showed resilience by rising nearly 1.8%, but it failed to recapture its 50-day line. Warner Bros. Discovery (WBD) stood out with a 2.6% lift. The S&P 500 fell for the first time in nine sessions, sliding 0.8%. Becton Dickinson (BDX) was among the worst S&P laggards, closing down 9.3% due to weak fiscal 2024 sales and earnings guidance. Small caps, particularly the Russell 2000, faced the worst downturn, plunging 1.6%. However, growth stocks, represented by the Innovator IBD 50 ETF (FFTY), fared better with a modest 0.3% decline.
Dow Jones Today: Disney’s Earnings Boost: Dow Jones industrials closed near session lows, dropping 220 points or 0.7%. Walt Disney stock emerged as the top performer, surging 6.9% following its latest quarterly report. This marked its best day since December 11, 2020, when it jumped 13.6%. Disney’s earnings exceeded expectations, and the Disney+ streaming service reached 150.2 million subscribers, surpassing forecasts of 148.7 million. Additionally, Disney raised its cost-restructuring targets to $7.5 billion from the previous $5.5 billion. DIS stock is now up 1.5% for the year, with the upcoming challenge of reclaiming its 200-day moving average. On the flip side, Amgen (AMGN) and Home Depot (HD) were the worst performers on the Dow Jones, falling 3.4% and 2.7%, respectively.
Magnificent Seven: Tesla’s Downturn After Negative Call: Tesla stock experienced the most significant decline among the Magnificent Seven, falling 5.5% after HSBC issued a negative research note. Analyst Michael Tyndall initiated coverage of TSLA with a “reduce” rating, equivalent to a sell. Despite acknowledging considerable potential in the firm, Tyndall believes the timeline for good returns is likely longer than the market and valuation reflect. TSLA stock closed off its daily lows but remained below its 200-day moving average, despite being up more than 90% for the year. Among the Magnificent Seven, Nvidia performed the best, rising 0.8%, briefly surpassing a double-bottom entry of 476.09 before fading. Meta Platforms (META) saw a modest 0.2% lift, while Microsoft (MSFT) and Apple (AAPL) fell slightly. AAPL fell 0.3%, holding above its 50-day moving average but remaining below a 198.23 entry, while MSFT lost 0.7% but stayed in a buy zone above a 346.20 entry. Google parent Alphabet (GOOGL) fell 1.2%, and Amazon.com (AMZN) dipped 1%.
Navigating the Market Pullback: Despite the overall negative sentiment in the stock market, some stocks tested buy points from proper bases. Jackson Financial, after clearing a cup-with-handle entry of 41.60, closed in a buy zone, rising 12.2% after beating earnings views. However, with an EPS Rating of 19, it ranks poorly among top-performing stocks in the last 12 months. TransDigm is in a buy zone after an 8.7% gain, clearing a flat base entry of 940. The aircraft components maker soared after fourth-quarter earnings and revenue beat analyst views, with the relative strength line reaching fresh highs—a bullish sign. Woodward also experienced a jump in its RS line, clearing a flat base buy point of 133.15 for a while, although it closed just below this level. Earnings for Woodward are due in seven days.
