The Dow Jones Industrial Average and other stock market indexes sold off early Thursday after Tesla (TSLA) spooked investors and American Express (AXP) missed earnings estimates. Dow Jones component Microsoft (MSFT) added to Elon Musk’s misfortunes, removing Twitter from the tech giant’s ad program, according to a Bloomberg report.
Tesla fell more than 7% after CEO Musk’s EV automaker posted in-line results. However, shareholders hit the exits after Musk committed to rapid volume growth that could severely impact profit margins. Tesla now expects 1.8 million automobiles to roll off its assembly lines in 2023.
Sellers got aggressive after the conference call, when Musk chatted about the unnerving series of price reductions so far in 2023. According to the controversial CEO, higher volumes and a larger fleet will lower margins in the short-term but meet Tesla goals in the long-term.
Investors took the other side, hitting the exits on fears that Tesla will become a traditional automaker, like General Motors (GM) and Ford Motor (F), forced to compete with numerous auto manufacturers now building out new EV production facilities.
Adding to Musk’s woes, Bloomberg reported that Microsoft’s social media and scheduling tools for advertisers will no longer support Twitter. Elon Musk responded, accusing Microsoft of using Twitter “illegally” and threatening to sue.
Lam Research (LRCX) met March-quarter top and bottom-line estimates but sharply lowered Q4 EPS and revenue guidance. Investors shook off the bad news, lifting LRCX stock more than 7%. Also, Taiwan Semiconductor (TSM) beat on Q1 2023 EPS but missed on revenue, and lowered Q2 revenue and profit margin guidance.
Once again, chip investors saw the glass as half-full, scooping up TSM shares for a 3.7% gain.
Old dogs barked as well in early Thursday action. IBM (IBM) posted a respectable quarter but is flat at this hour after early gains faded. And AT&T (T) bombed out after in-line results, dumping nearly 9%.
Rising Unemployment Pressures Dow Jones
Weekly unemployment claims rose to 245,000, ahead of 242,000 estimates, continuing an uptrend that signals weakening in the U.S. labor market. It marked the highest first-time filings since November 2021. The Philadelphia Fed index, which looks at local business activity, fell to -31.3, well below the -20.0 consensus.
March leading indicators fell 1.2%, worse than -0.4% expectations. February was also revised lower, from -0.3% to -0.5%. The numbers add to worries about a recession. March existing homes sales fell as well, to 4.4 million, worse than the 4.5 million consensus.
The Dow Jones Industrial Average lost 0.4% in the first hour while the S&P 500 shed 0.5%. The Russell 2000 small-cap index found interest but still lost 0.1%. The Nasdaq composite split the difference, down 0.4%.
The growth-heavy Innovator IBD 50 ETF (FFTY) lifted off session lows, down just 0.2%.
NYSE and Nasdaq volume fell in the first hour compared to Wednesday’s session. Asian and European markets traded lower, as investors worldwide rotated into safe havens.
The 10-year Treasury note yield lost 7 basis points, dropping to 3.53%. Bitcoin sliced through $29,000 to a two-week low at $28,000.
The Nasdaq, S&P 500 and Dow Jones remain well above their 50-day and 200-day moving averages, supporting IBD’s outlook of a “market in confirmed uptrend.”
However, the Russell 2000 is stuck below those resistance levels after failing a key test. This bearish divergence raises a red flag because it negatively impacts market breadth readings.
Gold Shines, Crude Oil Retreats, Dr. Copper Rangebound
West Texas intermediate crude oil futures continued to slump, selling off to a six-week low at $77.40 per barrel. On the up side, gold futures shook off Wednesday’s dip through $2,000, lifting back to $2,019. Gold’s price action in this quixotic market has been very bullish in recent months.
Copper futures continue to consolidate above $4.00 but can’t seem to break resistance around $4.20. But sector opportunities abound.
Southern Copper (SCCO) has rallied into a test of May 2021’s all-time high at 83.29. SCCO stock is now in a buy zone after breaking out of a 53-week cup with handle. Fund ownership is rising but big earnings and revenue misses in the second and third quarters of 2022 have put some investors on the defensive. SCCO stock fell 0.9% in the first hour.
Dow Jones Financials Lower After Amex Spooks Investors
Dow Jones component American Express dumped nearly 6% after missing Q1 2023 earnings estimates by 23 cents. AXP stock eased losses to 3.7% in the first hour. It beat on revenue and reiterated 2023 guidance but that didn’t stop a sell-off driven by investors worried about declining travel and business expense volumes in a recession. Amex cited softness in “U.S. small business spending.”
Also in the Dow Jones index, JPMorgan Chase (JPM) traded flat after four days of strong post-earnings price action.
Regional banks pulled back, dropping SPDR S&P Regional Bank ETF (KRE) less than 1%. Even so, the fund hit a three-week high Wednesday as earnings reports, at least so far, failed to show growing contagion.
Stock Market Today
Viva Las Vegas.
Las Vegas Sands (LVS) led a casino rally, lifting more than 5% after beating Q1 top and bottom line estimates. The lodging and casino giant benefited from improved results in both Nevada and Macao properties. Las Vegas Sands broke out of a shallow cup-with-handle base in heavy volume.
Rival Wynn Resorts (WYNN) rose 3%.
IBD 50 stocks were on the move in Thursday’s stock market.
IBD 50 component DraftKings (DKNG) hovered just below the 21.72 buy point of a two-month cup.
Also in the IBD 50, Inspire Medical Systems (INSP) is about 4% below the 282.41 buy point of a first-stage cup. The company develops solutions for sleep apnea. It isn’t expected to turn profitable this year but sales growth has been spectacular, averaging 70% or more year over year each quarter for the last seven quarters.
Follow Alan Farley on Twitter at @msttrader.
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