The Dow Jones Industrial Average dropped more than 700 points in morning trades Thursday, as the index was hit by an earnings-fueled drop from component Caterpillar (CAT). Meanwhile, Facebook and Instagram operator Meta Platforms (META) led techs lower, gapping down and plunging as much as 16% on the stock market today.
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Some commodities saw much milder declines. Gold price futures edged 0.3% lower to $2,332 an ounce while silver matched that decline, off 0.3% at $27.24. Crude oil traded at $82.51 a barrel, down less than 0.4%.
The Dow Jones index plunged more than 2.3% in the early going but trimmed that loss to around 1.6% two hours into trading. The blue chip average has seen its 2024 gains wither to less than 0.3%.
Just two of the 30 stocks in the index rose one point or more: defensive plays UnitedHealth (UNH) and Merck (MRK) in the health-care space. Nine others dropped 4 points or more in the price-weighted Dow.
Other megacap techs also hurt the Nasdaq composite, which was off as much as 2% and cut below 15,400 before rebounding a tad. The S&P 500 sank 1.3% early and is struggling to trim that loss, yet hovered just above 5,000.
The Dow Jones transportation average, in contrast, rebounded 0.3%. But the sector index got shellacked on Wednesday, sinking 2.3% amid dour earnings from the trucking sector.
IBD Big Picture: Why The Transport Stocks Sold Off
Small Caps Sell Off, Cost Of Money Jumps
Small caps sold off in weak action on the stock market today as investors also exited long-term U.S. government bonds. The Russell 2000 slipped 1.5% at around 11:30 a.m. ET while the benchmark 10-year Treasury yield jumped as high as 8 basis points to 4.73%. That’s not far from a 52-week high of 4.99% set in October amid growing expectations the Federal Reserve may wait until after the November U.S. elections before trimming short-term interest rates.
The cost of money has jumped sharply in 2024, worrying stock market investors. Higher interest rates raise the cost of borrowing in order to fund dividends and stock buybacks or invest in growth. The 10-year Treasury bond started the year at 3.86%.
The stock market now turns to focus on Friday’s report on inflation, namely the personal consumption expenditures or PCE index, before the open.
Stock Market Today: Techs Drop
Meta’s plunge through its 10-week moving average suggested that its heady run since the market bottom during the fourth quarter may be over for now. Meta last closed below this key technical level in the week ended Oct. 27. The Magnificent Seven stock had initially broken out of a first-stage base in mid-March 2023, clearing a flat base at 197.16.
Meta dropped as much as 16% intraday. Volume soared eight times its average pace over the past 50 sessions. Before lunchtime on Wall Street, more than 51 million shares exchanged hands, easily the highest so far on a single down day in 2024.
Please read this IBD tech story on Meta’s softer-than-expected sales outlook for 2024 and plans to increase capital expenditures to infuse artificial intelligence into its digital ads and e-commerce initiatives to fuel future growth.
This plan actually is helping some AI-related names to rally, including Arista Networks (ANET) (up 2.8% in heavy turnover) and datacenter maintenance expert Vertiv (VRT) (up 6% after reporting its own results on Wednesday morning).
Caterpillar, the mining and construction equipment titan, reported adjusted earnings of $5.60 a share, beating Wall Street’s estimate by 46 cents. Operating margin rose 110 basis points to 22.2% vs. a year earlier. However, sales of $15.8 billion fell $200 million short of analyst forecasts. Caterpillar also noted the economy softening in the key Asia-Pacific region, excluding China.
Caterpillar stock sliced through the 50-day moving average on the stock market today, a key defensive sell rule, after making solid gains following a breakout past a base buy point at 293.88. Shares are fighting to pull off session lows.
CAT’s 93 Relative Strength Rating means Caterpillar has outperformed 93% of all companies in the IBD database over the past 12 months.
This Chip Play Advances
On the upside, Impinj (PI) led the day’s stock market winners by gapping up powerfully. Shares in the specialist in radio frequency-based semiconductor technology rose more than 14%. The stock cleared a flat base with a 132 buy point in strong turnover.
Impinj reported a 25% decline in first-quarter profit to 21 cents a share. Sales melted 11% lower to $76.8 million. The small cap growth stock has a market value of less than $4 billion.
Impinj’s relative strength line marked new highs, triggering the blue dot on MarketSurge. This indicates supreme outperformance vs. the S&P 500 in the stock market.
Chipotle Mexican Grill (CMG) also defied the drop on the stock market today, rising more than 2% and trying to clear upside resistance at 3,000 following another quarter of solid results. First-quarter profit rose 27% to $13.37 a share on a 14% sales jump to $2.7 billion.
Analysts have been ratcheting their full-year profit estimates higher; they now see earnings rising 23% this year to $55.27 a share and up another 18% in 2024.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
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Read More:Stock Market Today: Dow Jones Falls 700 Points, Indexes Pounded As Meta, Caterpillar Plunge; Gold Price Holds Steady
2024-04-25 14:51:00