The stock market continued to slide, with all the major indexes falling further below their 50-day moving average. ASML and Taiwan Semiconductor made cautious comments, slamming chip stocks. Netflix fell on weak guidance. Tesla plunged ahead of upcoming earnings amid sweeping layoffs and huge questions about its strategy. United Airlines surged on earnings.
Stock Market Tumbles
The market suffered heavy losses, with all the key indexes falling well below their 50-day moving averages. Once-leading chip stocks sold off on ASML and Taiwan Semiconductor. Crude oil prices fell, even with the Iran strike. Treasury yields jumped to fresh 2024 highs, but did come off highs. Treasury yields jumped to five-month highs, though they pared gains. Crude oil prices retreated.
Retail Sales, Powell Push Back Rate Cuts
Strong retail sales signaled that consumer spending has staying power. March sales rose 0.7% above forecasts for 0.4%, while February's gain was revised up to 0.9% from 0.6%. Excluding autos and gas, sales jumped 1%, with February also revised higher. Fed chief Jerome Powell no longer thinks inflation is trending lower. The sales data and Powell's comments pushed expectations for the first rate cut all the way to September. Meanwhile, Housing starts plunged 15% in March, but permits declined a more-modest 4.3%. Initial jobless claims held at a low 212,000, giving no sign of a softer labor market sales. The Philly Fed manufacturing index unexpectedly jumped to a two-year high, as the once-lagging factory sector gains momentum.
Chip Stocks Drop On Soft Outlook
ASML and Taiwan Semiconductor Manufacturing helped to spark a sell-off in the chip sector. Chip gear leader ASML posted mixed first-quarter results while contract chipmaker TSMC delivered a beat-and-raise report. But both firms made cautious comments about the months ahead. ASML missed its Q1 sales target and guided below views for the current quarter, while its earnings were better than expected. TSMC said sales of AI chips helped to offset weakness in sales of chips for smartphones and other markets. It also lowered its industry growth expectations slightly for the year, while keeping its company growth target.
Intuitive Surgical Tops Key Metrics
Intuitive Surgical beat first-quarter expectations late Thursday, with adjusted EPS up 22% and revenue rising 11% to $1.89 billion. Notably, the number of procedures performed using Intuitive's bread-and-butter robot, da Vinci, surged 16%. that company is in the process of launching its next-generation system, da Vinci 5. After gaining FDA clearance in mid-March, Intuitive Surgical placed eight new da Vinci 5 systems before the end of the quarter.
Tesla Dives On Layoffs, Growth Fears
Tesla plunged to a 52-week low amid growing evidence that a $25,000 EV will be pushed back for several years, at the very least, raising serious questions about growth drivers. CEO Elon Musk made it clear that he's focusing almost entirely on autonomous driving. Tesla will cut more than 10% of its global workforce, or over 14,000 jobs, while some key execs left. Meanwhile,, Tesla requested that shareholders ratify Musk's $55 billion 2018 compensation plan despite a Delaware court voiding the plan earlier this year. On Friday, Tesla recalled Cybertruck vehicles to fix a faulty accelerator pedal.
Netflix Q2 Guidance Disappoints
Netflix beat Wall Street's targets for the first quarter but missed views with its Q2 sales outlook. Netflix added 9.33 million subscribers in the March quarter, topping estimates for 5.48 million. It ended the period with 269.6 million total subscribers worldwide. Netflix earnings jumped 83% with revenue up 15% to $9.37 billion. For the current quarter, Netflix guided up on EPS but slightly lower on revenue. The streaming video leader also rattled investors by saying it would stop reporting subscriber numbers and average revenue per member, beginning in Q1 2025.
United Soars On Earnings, Boeing
United Airlines reported a smaller-than-expected loss while revenue grew 10% to $12.54 billion, slightly beating. The carrier cited $200 million in losses during the quarter to the Boeing 737 Max 9 grounding. United said reached a confidential compensation deal with Boeing for the financial damages. But the airline expects to receive fewer aircraft deliveries this year due to delays. United guided up on Q2 earnings while maintaining full-year guidance, with the midpoint above consensus. United shares skyrocketed.
UnitedHealth Rebounds On Earnings
The Dow health insurance giant reported a 10% EPS gain, easily beating, with revenue up 9% to $99.8 billion. The adjusted figures backed out some, but not all, of the costs related to a cyberattack on its Change Healthcare unit that snarled bill paying and prescription approval across the industry. Adjusted for a modest impact from the cyberattack, UnitedHealth reported its medical cost ratio, or benefits paid out as a share of premiums, rose to 83.9%, a hair above estimates. Though up from 82.2% a year earlier, that relieved investor worries about strong health care utilization trends. UNH stock, which had fallen to its lowest level since November 2021, surged.
D.R. Horton Tops Views
The homebuilder giant reported a 29% EPS gain while revenue climbed 14% to $9.11 billion, both beating fiscal Q2 views comfortably. Home orders rose 14%, or 17% in value. D.R. Horton guided up on full-year revenue, but mostly on the Q2 beat. The builder raised its full-year buyback guidance to $1.6 billion from $1.5 billion. Shares tried to jumped Thursday but gave up gains, falling for the week. Meanwhile, KB Home OK'd the purchase of up to $1 billion in stock and hiked its quarterly dividend to 25 cents a share from 20 cents. Shares rose Friday on that news, paring weekly losses.
Banks Generally Top Views
Goldman Sachs, Morgan Stanley, Bank of America, PNC Financial and Bank of New York Mellon all announcing results. Goldman on Monday reported a 32% increase in earnings while net revenue jumped 16.3%, primarily driven by gains in investment banking. Morgan Stanley on Tuesday reported 19% EPS gain, reversing eight quarters of declines. Revenue growth downshifted, rising 4.3%. Bank of America recorded a 12% EPS decline, but came in ahead of forecasts. PNC managed to beat forecasts despite another EPS decline. Bank of New York Mellon reported an 11% earnings increase.
Online Brokerages Deliver
Charles Schwab and Interactive Brokers advanced after topping earnings forecasts. Schwab reported a 20% adjusted EPS decline with revenue off 7% to $4.74 billion, slightly beating views. It added $88.2 billion in net new assets while total client assets increased 20% to a record $9.11 trillion. SCHW stock rose solidly, moving out of a buy zone. Interactive Brokers reported a 21% EPS gain, though revenue fractionally missed with a 14% gain to $1.203 billion. IBKR shares rebounded off their 50-day line, rising slightly for the week.
Oil Services Giant SLB Meets Views
Q1 earnings grew 19%, in line with views. Revenue grew 13% to $8.71 billion, fractionally topping. About half of the Q1 revenue increase came from its Aker subsea business, which was added as part of its OneSubsea joint venture in the fourth quarter. SLB saw Q1 revenue from international operations jump 18% even as sales in North America declined 6%. Looking to Q2, SLB expects a seasonal rebound in drilling activity in the Northern Hemisphere and "robust activity internationally." SLB aims to return $3 billion to shareholders in 2024 and $4 billion in 2025. "The oil and gas industry continues to benefit from strong market fundamentals driven by a growing demand outlook," SLB CEO Olivier Le Peuch said. Shares fell amid falling crude prices.
Health Care Giants' Results Mixed
Abbott Laboratories and Johnson & Johnson topped first-quarter earnings expectations, but sales proved to be a mixed bag. Abbott's EPS declined 5%, while J&J's rose 12%. Abbott beat sales forecasts, but issued light guidance. J&J revenue was light, with psoriasis drug Stelara coming up short.
News In Brief
Intra-Cellular Therapies rocketed to a record high Tuesday after its drug, Caplyta, showed promise in treating a common form of depression. The results topped the company's own expectations and other antipsychotics tested for the same use. Caplyta treats schizophrenia and depressive episodes tied to bipolar disorder.
Eli Lilly reported that its weight-loss drug was successful in treating sleep apnea for obese patients. Lilly is planning to ask global regulators to approve the drug for this use later this year.
Procter & Gamble reported better-than-expected Q1 earnings and raised its full-year EPS target, but the 0.6% revenue gain to $20.2 billion fell short.
American Express earnings topped views, while the Dow Jones payments giant reported an 11% revenue gain to $15.8 billion, roughly in line. But payments over AmEx's network fell short.
