Dow Jones futures were little changed Thursday, along with S&P 500 futures and Nasdaq futures. Tesla tumbled late after missing fourth-quarter views and warning of "notably lower" growth. CEO Elon Musk downplayed in-house Dojo chips.
ServiceNow, Lam Research, United Rentals, IBM and CSX Corp. also released results overnight.
Humana plunged after warning that 2024 earnings will be only about half of Wall Street consensus amid higher Medicare Advantage costs. The move, following a warning a week earlier, hit other health insurers, including Dow giant UnitedHealth.
Boeing fell as the FAA halted 737 Max production expansion plans.
The stock market rally had a mixed session Wednesday, slashing intraday gains as Treasury yields rose. Netflix and ASML stock fueled tech gains, with ASML lifting the chip sector, including LRCX stock.
The market rally has been getting extended as earnings season kicks into high gear as of Wednesday night. So the retreat from intraday highs wasn't a big surprise.
ServiceNow stock, Nvidia and Meta Platforms are on IBD Leaderboard. Nvidia and Microsoft stock are on SwingTrader. MSFT stock is on IBD Long-Term Leaders. ServiceNow and URI stock are on the IBD 50 and IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures were 0.1% below fair value. IBM gave blue chips a lift, but Boeing and UNH stock were drags. S&P 500 futures edged higher and Nasdaq 100 futures climbed 0.2%. Tesla stock and ServiceNow are big S&P 500 and Nasdaq 100 components.
The 10-year Treasury yield dipped to 4.16%.
Crude oil rose 1%.
At 8:30 a.m. ET, the Commerce Department will offer its first reading on fourth-quarter GDP growth, along with December durable goods orders. The Labor Department will release jobless claims at the same time.
All that could swing Dow futures and Treasury yields amid the heavy earnings moves.
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 opened strong, led by tech earnings. But stocks came well off intraday highs as Treasury yields reversed higher.
The Dow Jones Industrial Average fell 0.3% in Wednesday's stock market trading. The S&P 500 index edged up 0.1% after hitting another record high intraday. The Nasdaq composite finished 0.4% higher after jumping as much as 1.3% intraday.
Tech titans led as the Nasdaq 100 still closed up 0.6%. Netflix spiked 10.7% and ASML stock 8.85%.
Decliners led advancers, ending a few days of improving market breadth.
The small-cap Russell 2000 reversed lower to fall 0.7%, though it's still holding the 21-day line. The Invesco S&P 500 Equal Weight ETF slumped 0.5%. The First Trust Nasdaq 100 Equal Weighted Index ETF reversed to end down 0.1%.
A number of high-beta growth stocks suffered significant losses. Homebuilders and related stocks struggled for a second straight day.
The 10-year Treasury yield rose 4 basis points to 4.18%, helped by a weak five-year Treasury note auction. The 10-year yield reversed higher from yet another test of the 200-day line. It closed just above its 50-day line for the first time since Nov. 13.
Treasury yields may have been the catalyst for stocks pulling back Wednesday afternoon, but the market rally had been starting to look extended.
The Nasdaq 100 is 6.6% above its 50-day moving average, even after slashing intraday gains. The Nasdaq composite is 5.9% above that key level.
While the Nasdaq could get more extended, the odds of a pullback would increase with a greater likelihood that any retreat would be sharp.
U.S. crude oil prices rose 1% to $75.09 a barrel.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF closed fractionally higher, with NOW stock a significant component. The VanEck Vectors Semiconductor ETF jumped 1.8%. LRCX stock is a big SMH holding, along with ASML stock.
Reflecting more-speculative story stocks, ARK Innovation ETF fell 2.3% and ARK Genomics ETF 2.5%. Tesla stock remains a major holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF gave up 0.5% and SPDR S&P Homebuilders ETF retreated 1.6%. The Energy Select SPDR ETF bounced 1.5% and the Health Care Select Sector SPDR Fund declined 0.9%
The Industrial Select Sector SPDR Fund shed 0.6%. The Financial Select SPDR ETF climbed 0.4%.
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Tesla Earnings
Tesla earnings tumbled 40% to 71 cents a share, while revenue rose just 3.5% to $25.17 billion. Both missed views.
The EV giant didn't provide specifics, but warned that 2024 delivery growth may be "notably lower" than in 2023.
On the conference call, Elon Musk said the current plan is to start production of the next-generation vehicle in the second half of 2025, but he acknowledged that he is often "optimistic" about timelines.
Tesla still hasn't shown an image of the $25,000 vehicle, let alone a prototype. Musk said the next-gen EV will have the most advanced manufacturing system in the world. Achieving that, which may be necessary to make the a cheap EV profitable, could be a challenge that delays output.
Tesla CFO Vaibhav Taneja didn't profit guidance on profit margins. He said that recent cost reductions have largely run their course, suggesting few easy offsets as price cuts and incentives continue into 2024.
Cybertruck production is slowing improving, but Musk said "demand is off the hook." However, Tesla removed customer deposits from an earnings statement.
Meanwhile, Musk said the Tesla is using Nvidia chips for autonomy efforts, saying in-house Dojo chips are a "long shot." That undercuts arguments from some Tesla bulls, including Morgan Stanley's Adam Jonas, that Dojo will eventually be a huge growth driver.
Musk talked up Optimus, though another Tesla executive said there's still the challenge of the humanoid robot "doing useful things."
Overnight, analysts were busy slashing Tesla earnings estimates for 2024, something they've been doing since the start of 2023. They now see just 10% EPS growth to $3.38, vs. $3.63 before the earnings report and $3.81 at end of last year.
Tesla stock skidded 9% in overnight trade, signaling a move below the late October lows. Shares dipped 0.6% to 207.83 on Wednesday, sliding for several weeks and slumping overall since July.
The relative strength line has tumbled to an eight-month low, reflecting TSLA stock's deterioration vs. the S&P 500. Bottom line, Tesla stock is in the body shop for now.
ServiceNow Earnings
ServiceNow earnings beat views with guidance solid.
NOW stock edged higher in Thursday's premarket. Shares climbed 1.3% to 763.42 on Wednesday, well extended from a flat base cleared in early November.
As the first big software maker to report, ServiceNow results and guidance could have a big impact on the sector.
Lam Research Earnings
Lam Research earnings and revenue topped Q2 views, with the chip-gear maker guiding in line for fiscal Q2.
LRCX stock nudged higher before the open.
Shares rose 2.1% to 848.16 on Wednesday, buoyed by strong earnings and orders from Dutch chip-equipment giant ASML.
Fellow chip-gear maker KLA Corp. reports Thursday night, along with Dow giant Intel, a big chip-equipment buyer.
United Rentals Earnings
United Rentals earnings beat views with the equipment rental firm also hiking its dividend by 10%.
URI stock rose solidly overnight. Shares edged down 0.2% to 576.90 on Wednesday, erasing intraday gains after trying to clear a short consolidation.
Heavy equipment maker Caterpillar will report Thursday morning. CAT stock rose 0.6% to 290.68 on Wednesday, trying to reclaim a 293.88 consolidation buy point.
IBM Earnings
IBM earnings and revenue topped Q4 views, with the venerable Dow giant giving strong cash flow guidance.
In overnight trade, IBM stock jumped. Shares fell 1 cent on Wednesday to 173.93, after hitting a nine-year high intraday.
CSX Earnings
The rail giant reported slightly lower earnings and revenue that were largely in line with Q4 views.
CSX stock edged higher early Thursday. Shares declined 1.4% on Wednesday to 34.39, continuing to trade tightly within a buy zone from a cup-with-handle base, according to MarketSmith analysis.
Union Pacific topped Q4 views slightly early Thursday, with shares up a fraction before the open. Norfolk Southern is due Friday. Both UNP and NSC stock are in buy range.
What To Do Now
The market rally has been on a tear for the past week.
But it's getting extended again just as earnings season kicks into high gear. Positive reports from Taiwan Semiconductor, Netflix, ASML and others mean that expectations are high. If megacap earnings disappoint over the next week, the market reaction could be very negative with growth plays suffering outsized losses.
So that's a reason to be cautious about new buys and pay extra attention to key earnings reports and the overall market. Investors could choose to take some partial profits to lock in gains before a possible pullback, but that depends on your investing style, exposure levels and more.
Keep building your watchlists, looking for leaders setting up again and new sectors joining the rally, such as oil and mining stocks.
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