Dow Jones futures and S&P 500 futures fell slightly Thursday morning, while Nasdaq futures tilted higher. The 10-year Treasury yield kept rising, on the cusp of 5%. Tesla (TSLA) missed earnings views, while Elon Musk tempered Cybertruck expectations even with deliveries starting next month. Netflix (NFLX) surged on results and price hikes. Chip giants Lam Research (LRCX) and Taiwan Semiconductor (TSM) beat views.
X
The stock market rally fell sharply Wednesday as the 10-year Treasury yield surged to a fresh-long term high. Weak earnings or guidance also weighed on stocks. The major indexes broke below some key levels.
After the close, Tesla earnings tumbled even more than lowered views. The EV giant said Cybertruck deliveries will start in November, but CEO Elon Musk tempered expectations, saying “we dug our grave” with the complex vehicle. TSLA stock turned lower after Musk began speaking. Shares already fell solidly in Wednesday’s session.
Netflix jumped late on stronger-than-expected earnings and subscriber growth, as well as plans to hike prices.
Chip-gear giant Lam Research topped views Wednesday night but LRCX fell. Foundry giant Taiwan Semiconductor topped forecasts early Thursday, with TSM stock rising before the open.Tesla stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures declined 0.1% and Nasdaq 100 futures were up about 0.1%. Tesla, Netflix and LRCX stock are all S&P 500 and Nasdaq 100 members.
The 10-year Treasury bond yield jumped several basis points to 4.96%, with the 5% level very much in sight.
Crude oil futures fell more than 1%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally came under more pressure Wednesday, with the major indexes breaking below key levels. The 10-year Treasury yield rose nearly 6 basis points to 4.9%, hitting a 16-year high of 4.93% intraday.
United Airlines (UAL), J.B. Hunt Transport (JBHT), ASML (ASML), Morgan Stanley (MS) and Terex (TEX) sold off on earnings or guidance, with many related firms struggling too.
The Dow Jones Industrial Average declined 1% in Wednesday’s stock market trading, back below the 200-day moving average. The S&P 500 index fell 1.3%, sliding below the 21-day line. The Nasdaq composite skidded 1.6%, falling back from the 50-day line to below the 21-day and undercutting last Friday’s lows.
The next big level for the Nasdaq is the low of its Oct. 6 follow-through day. Closing below that level would be a strong sign that rally would fail.
Market breadth was decisively weak, following a modest win for advancers on Tuesday.
The small-cap Russell 2000 tumbled 2.1%, more than offsetting Tuesday’s 1.1% gain. The Invesco S&P 500 Equal Weight ETF (RSP) retreated 1.6%.
Leading stocks generally struggled, with even the resilient names mostly retreating.
The big exception was the energy sector, with oil stocks rallying along with crude prices. U.S. crude oil prices rose 1.9% to $88.32 a barrel. Gasoline futures jumped 3%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 1.5%. The VanEck Vectors Semiconductor ETF (SMH) slumped 2%. LRCX stock, ASML, KLAC, AMAT and TSM are all SMH components.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both tumbled 4.5%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) retreated 2.6% and the Global X U.S. Infrastructure Development ETF (PAVE) slid 3.7%. U.S. Global Jets ETF (JETS) descended 4.4%. SPDR S&P Homebuilders ETF (XHB) stepped down 3.3%. The Energy Select SPDR ETF (XLE) advanced 0.9% and the Health Care Select Sector SPDR Fund (XLV) fell 0.9%.
The Industrial Select Sector SPDR Fund (XLI) declined 2.4%.
The Financial Select SPDR ETF (XLF) sank 1.7%. The SPDR S&P Regional Banking ETF (KRE) tumbled 2.7%.
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Tesla Earnings
Tesla earnings fell 37% to 66 cents a share, the worst EPS in two years and missing lowered views of 73 cents. That’s even with regulatory credits nearly doubling vs. Q2 and a year earlier.
Revenue rose 9% to $23.35 billion, also below views.
Analysts had cut their Tesla EPS forecasts after the EV giant reported Q3 deliveries that fell more than expected vs. Q2.
Tesla’s gross margins fell to 17.9% vs. 18.2% in Q2 and 25.1% a year earlier. Tesla continued to cut prices in Q3, with further reductions this month.
Operating profit plunged 52%.
The Tesla earnings release said the company still plans to deliver around 1.8 million vehicles this year.
TSLA stock bulls have been looking past Q3 results, pinning their hopes on the Cybertruck and other potential growth drivers.
Tesla Cybertruck Coming, Musk Curbs Enthusiasm
The EV maker said Tesla Cybertruck deliveries will start next month, with a Nov. 30 delivery event. But it’s unclear when meaningful deliveries might begin. Key questions such as prices, battery range and other specs remain unknown.
Elon Musk, who was fairly subdued on the Tesla earnings call, was quick to rein in exuberance.
“I want to temper expectations for Cybertruck, Musk said. “It’s a great product, but financially it’ll be 12-18 months to be a significant positive cashflow contributor.” He added that ramping up production “will be extremely difficult.”
Musk later said, “We dug our own grave with Cybertruck.”
Musk appeared to suggest that Tesla’s long-term goal of 50% annual delivery growth no longer applies.
Musk said Tesla is “laying the groundwork” for starting work on a new plant in Mexico, but gave no specifics. But he suggested that high interest rates and economic conditions may be a factor in the timing of the plant’s construction.
That would suggests that the Mexico plant won’t be up and running until 2026, if not later. That also suggests that a huge, cheaper next-generation vehicle won’t out until that time, at least for North America.
Musk and other executives didn’t provide any clarity on when the updated Model 3 might launch in the U.S. or progress on self-driving.
On the call, Musk touted fully autonomous vehicles and robots as key to Tesla’s long-term growth and TSLA stock valuation.
Tesla Stock
Tesla stock initially rose overnight on the Cybertruck delivery news, but turned down after Musk began speaking. TSLA stock fell 5% early Thursday.
Shares slumped 4.8% to 242.68 Wednesday, falling below their 50-day line. Tesla stock has a 278.98 cup-with-handle base.
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Netflix Earnings
Netflix added 8.76 million streaming subscribers, smashing views, while earnings also topped. Revenue was in line. The streaming media giant plans to hike prices yet again.
NFLX stock surged more than 10% in extended action. Shares fell 2.7% on Wednesday to 346.19, round-tripping a big breakout rally that started five months earlier.
Lam Research Earnings
Lam Research earnings solidly beat fiscal Q4 views, while revenue also topped. The chip-equipment maker guided in line for fiscal Q1.
LRCX stock fell modestly in overnight trade. Shares declined 1.2% to 642.24 in Wednesday’s session, even with ASML warning of flat 2024 profit before the open. LRCX stock has a 726.52 consolidation buy point, according to MarketSmith analysis. It could have an early entry from a decisive move above the 50-day line, clearing last week’s highs.
KLA Corp. (KLAC) was not yet active while and Applied Materials (AMAT) edged lower after both fell about 1% on Wednesday. Both have been holding up, not far from buy points.
ASML (ASML) rose modestly overnight after the Dutch chip-equipment giant skidded Wednesday on guidance for flat 2024 sales.
Taiwan Semiconductor Earnings
Taiwan Semiconductor earnings topped Q3 views. TSM stock rose modestly before the open. Shares fell 1.5% on Wednesday, back below the 50-day line. The foundry giant, which makes semiconductors for Nvidia, Apple (AAPL) and many more, is also a massive chip-equipment buyer. So its results, guidance and spending plans are important for the sector.
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What To Do Now
This is a time for patient engagement. The market rally could break decisively higher relatively quickly. But that hasn’t happened yet, while the Nasdaq right now seems at greater risk of breaking decisively lower.
If the market takes off again, a slew of buying opportunities would likely appear quickly. So investors need to be ready. Keep your watchlists up to date and pay attention to the market, ready to act.
But don’t act yet. Don’t get excited by the indexes and leading stocks moving within recent ranges. A number of stocks have held up well, but some suffered sharp losses Wednesday.
There’s a clear downside risk, with Treasury yields, Mideast tensions and earnings season all potential negatives for the market and individual stocks. It’s hard to see a sustained market rally if Treasury yields are rising.
You should have slim to modest exposure at most, and be ready to scale out if your positions or overall market deteriorate.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
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