Stock market today: Tech leads stock slide, Nvidia falls almost 4%

US stocks fell on Wednesday, struggling to mount a comeback as investors' interest rate worries coincided with a fresh slate of corporate earnings.

After all three major indexes started the day in the green, the S&P 500 (^GSPC) ended down about 0.6%. The Dow Jones Industrial Average (^DJI) lost a more modest 0.1%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) led the losses, falling over 1%.

Big Tech drove the market action, with Nvidia (NVDA) falling almost 4% and Meta (META) sliding over 1%. The tech sector (XLK) was the worst-performing sector in the S&P 500, falling nearly 1.5%.

Stocks have struggled to reprise their early-year rally, buffeted most recently by worries over heightened tensions in the Middle East and uncertainty over the timing and depth of rate cuts.

Another bump came on Tuesday as Federal Reserve Chair Jerome Powell's downbeat comments on inflation prompted some to recalibrate their bets on a September cut to December.

After robust big bank results signaled a return to strength on Wall Street, investors are looking to earnings season to give stocks a push upward. United Airlines (UAL) shares rose more than 17% after posting a revenue beat late Tuesday.

But shares of ASML (ASML) fell more than 7% in New York after the Dutch company's quarterly update. ASML, the largest supplier of equipment to chipmakers worldwide, missed order estimates, though its sales to China held up amid US curbs.

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The S&P 500 has its worst stretch since start of 2024

Wed, April 17, 2024 at 4:00 p.m. EDT, Josh Schafer

The S&P 500 closed lower for a fourth straight day on Wednesday. This marks the benchmark average's first four-day losing streak since a stretch from late December into the start of 2024, per Bespoke Invest.

The market action has whipsawed more than usual too, reflecting the "bumpier path" forward some Wall Street strategists see the market headed.

In each of the last four sessions, the S&P 500 has closed at least 0.5% lower than its session high. The only other time that's happened since the start of 2023 was back in October, the most recent bottom for the S&P 500, Bespoke also noted.

Trending tickers on Wednesday

Wed, April 17, 2024 at 3:15 p.m. EDT, Josh Schafer

Arm holdings (ARM) led the Yahoo Finance trending tickers page on Wednesday as shares fell nearly 10% amid a broader sell-off in chip stocks. The move came after ASML (ASML), the largest supplier of equipment to chipmakers worldwide, missed order estimates in a quarterly release on Wednesday. Nvidia (NVDA) shares also fell more than 2% on the news.

Meanwhile, United Airlines (UAL) stock rose more than 16% after the company reported a narrower-than-expected loss than Wall Street expected. For the first quarter, United posted an earnings per share loss of $0.15, narrower than the $0.57 Wall Street expected, per Bloomberg data.

Meanwhile, United guided for earnings per share in the current second quarter in a range of $3.75 to $4.25. This came in above Wall Street's projections for $3.73.

Oil prices fall as 'geopolitical premium' undwinds

Wed, April 17, 2024 at 2:35 p.m. EDT, Ines Ferré

Oil futures fell roughly 3% on Wednesday, extending their declines over the past two days as the risk of a widening conflict in the Middle East appeared to ease.

Analysts anticipate Israel is unlikely to hit Iran's oil production when it responds to Tehran's attack on Israeli government targets unleashed over the weekend.

"Crude futures continue to unwind some of the Geopolitical premium that has been priced in," Dennis Kissler, senior vice president at BOK Financial, said in a recent note on Wednesday.

West Texas Intermediate (CL=F) futures settled at $82.69 per barrel, while Brent (BZ=F), the international benchmark price, fell below $88 per barrel.

Crude has come off its 2024 intraday highs touched earlier this month when WTI rose above $87 per barrel and Brent surpassed $92 per barrel.

High rates haven't always been a problem for stocks

Wed, April 17, 2024 at 2:25 p.m. EDT, Josh Schafer

Rising bond yields have been a key catalyst for stock drawdowns over the past year.

But as the market shifts to expect that interest rates may remain higher than the previous decade for longer than many initially hoped, BMO chief investment strategist Brian Belski notes that higher rates haven't always been a bad enviornment for stocks.

In an analysis going back to 1990, Belski found that the S&P 500's monthly return has actually delivered its best annualized average returns when the 10-year Treasury yield (^TNX) was higher.

Belski's work shows the benchmark average delivered an average annual return of 7.7% in months where the 10-year Treasury yield was less than 4%, compared to an average annual return of 14.5% in months when the 10-year was 6%.

"In a higher interest rate environment, certainly higher than 0%-1% or 0%-2%, stocks traditionally do very well," Belski said. "So I think we're recalibrating that. We still think from these levels stocks are higher at year-end."

Belski's research shows that, on average, stocks have performed better in a rising rate environment than in a falling rate environment. The average annual rolling one-year return for the S&P 500 during a falling rate environment is 6.5%, while it's 13.9% in a rising rate regime.

He argued that this makes sense given that one reason the Fed would keep rates lower or cut them would be a sluggish economic growth outlook. Given the current backdrop is one in which the Fed feels the economy is in a strong position to handle higher borrowing costs, increased rates might not be so bad for stocks, Belski said.

"If we can hover between this 4% and 5% range [on the 10-year Treasury yield] and still have strong employment, but most importantly, have very strong earnings and, oh by the way, cash flow, I think the market can do very well," he added.

ASML's earnings miss sinks chips sector

Wed, April 17, 2024 at 1:22 p.m. EDT, Josh Schafer

Shares of ASML (ASML) fell more than 8% in New York after the Dutch company's quarterly update revealed that the largest supplier of equipment to chipmakers worldwide missed order estimates for the most recent quarter.

Net bookings for ASML's machinery declined 4% compared to the same year prior and were down nearly two-thirds from the quarter prior.

“Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry’s continued recovery from the downturn,” ASML CEO Peter Wennink said in a statement.

The disappointing outlook, by Wall Street's standards, forced selling action across the chip sector. Market leader Nvidia (NVDA) dipped more than 2%, while AMD (AMD) fell more than 4%.

Homebuyers applied for more mortgages even as rates rose

Wed, April 17, 2024 at 1:00 p.m. EDT, Dani Romero

In a counterintuitive development, mortgage demand picked up for the second consecutive week even though rates rose during that period.

The volume of mortgage applications increased 3.3% from the prior week ending April 12, the Mortgage Bankers Association (MBA) reported. Purchase applications drove the increase.

Joel Kan, MBA's deputy chief economist, said in a release that "application activity picked up, possibly as some borrowers decided to act in case rates continue to rise."

Mortgage rates have been hovering above 7%. The prospect of rate cuts by the Federal Reserve looks cloudy following recent higher-than-anticipated inflation prints.

“Rates increased for the second consecutive week, driven by incoming data indicating that the economy remains strong and inflation is proving tougher to bring down. Mortgage rates increased across the board, with the 30-year fixed rate at 7.13% — reaching its highest level since December 2023,” Kan said.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less increased to 7.13% from 7.01%, the MBA data showed. Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.90 % from 6.80%.

Tech leads losses on Wednesday

Wed, April 17, 2024 at 12:31 p.m. EDT, Josh Schafer

Stocks turned lower on Wednesday led by losses across tech.

As Yahoo Finance's Myles Udland recently noted, the so-called "Magnificent" group of tech stocks that led the 2023 market rally still represent a historically high portion of the S&P 500's market cap. And midway through the trading day on Wednesday, that helped lead stocks lower.

Nvidia (NVDA) fell more than 2%, while Meta (META) slid nearly 2%. The tech sector (XLK) was the worst-performing sector in the S&P 500, falling more than 1%.

Below is a look at moves in the tech-heavy Nasdaq 100 (^NDX) as of 12:30 p.m. ET.

Source: Yahoo Finance

Investors increasingly expect 'no landing' for US economy

Wed, April 17, 2024 at 11:43 a.m. EDT, Josh Schafer

A growing number of investors believe the US economy is headed for a "no landing" scenario, in which inflation doesn't reach the Fed's 2% target, but the US economy keeps growing.

Thirty-six percent of respondents to Bank of America's Global Fund Manager Survey, released on Tuesday, said they believe the most likely outcome for the global economy is a "no landing." This was a noted move higher from the 23% who saw the outcome a month ago and the highest level seen since June 2023, the earliest date on BofA's graph.

Meanwhile, 54% of respondents believe a soft landing — where economic growth slows but not to the point of recession, and inflation returns to its historical average — is the most likely outcome.

This shows a shift in the discussion on Wall Street, as just 7% of respondents believe a hard landing, where restrictive policy forces the economy into recession, is the base case. Last year, much of the debate on Wall Street was whether a hard or soft landing was in the cards for the economy.

Now, the debate has shifted to whether recent better-than-expected economic data could prohibit further progress on inflation.

"Recessions don't hit the US economy without a catalyst of some sort, and we just don't see what is going to stop consumer spending," Jefferies US economist Tom Simons wrote in a note on April 12. "With demand still solid, it is hard to see how inflation will continue to slow down, and thus it is hard to see how the Fed can cut rates."

Read more here.

Earnings are under more scrutiny this quarter

Wed, April 17, 2024 at 10:57 a.m. EDT, Josh Schafer

It's early in earnings season, but a warning sign is flashing for investors as quarterly results roll in.

In a market that's priced in significant earnings growth for the rest of this year, investors are watching closely how companies live up to their expectations.

With 43 S&P 500 companies having reported first quarter earnings, those that miss estimates for both earnings per share and revenue have seen a negative stock reaction of more than 10% the next day. This is well above the 3.1% average fall seen over the last five years, per Evercore ISI's Julian Emanuel.

And as seen in the chart below from Emanuel, any mix of company beats or misses on earnings and revenue for the quarter have driven worse returns for investors on average this quarter.

A chart from Evercore ISI shows that stocks have seen more aggressive swings to the downside when missing on earnings and revenue this quarter. (Source: Evercore ISI)

Given the market's recent slump on fears inflation's downward path may have stalled and the Fed could cut rates less than expected, how this earnings season plays out will be increasingly "critical" for the market rally, according to BlackRock global chief investment strategist Wei Li.

"Earnings have come to the rescue because markets are up year to date, despite the hawkish repricing," Li told Yahoo Finance. "So we'll see if earnings will continue to come to the rescue of hawkish repricing, even as the bar has increased as well for earnings."

United Airlines stock soars more than 10% after earnings

Wed, April 17, 2024 at 9:59 a.m. EDT, Josh Schafer

United Airlines (UAL) stock rose more than 10% on Wednesday morning after the company reported better-than-expected quarterly results.

The airliner reported a $200 million impact on earnings from the recent Boeing 737 Max 9 grounding, a loss lower than Wall Street analysts expected.

"In a way, you could say the damage here is pretty limited," Nicolas Owens, Morningstar Industrials equity analyst, told Yahoo Finance.

For the first quarter, United posted an earnings per share loss of $0.15, narrower than the $0.57 Wall Street expected, per Bloomberg data. Meanwhile, United's revenue of $12.54 billion came in above estimates for $12.44 billion.

United guided for earnings per share in the current second quarter in a range of $3.75 to $4.25, which was above Wall Street's projections of $3.73.

Stocks rebound in early trade on Wednesday

Wed, April 17, 2024 at 9:34 a.m. EDT, Josh Schafer

US stocks rose on Wednesday, with the S&P 500 (^GSPC) eyeing a comeback as investors put interest rate worries on the back burner to focus on quarterly earnings.

The S&P 500 was up roughly 0.4% after booking a three-day run of losses, while Dow Jones Industrial Average (^DJI) popped 0.4%. The tech-heavy Nasdaq Composite (^IXIC) led the gains, rising more than 0.5%.

United Airlines (UAL) was the standout on Wednesday morning, with shares rising more than 7% in morning trade after posting a revenue beat after the bell.

Netflix bulls not shaken ... yet

Wed, April 17, 2024 at 7:15 a.m. EDT, Brian Sozzi

Netflix (NFLX) shares have had a great ride this year, up 27% year to date (a move not many people have talked about).

The bulls haven't been shaken in a volatile April for markets, with the stock up 1.6% versus the 3.9% drop for the S&P 500.

The vibe on the Street is that when Netflix reports earnings after the close on Thursday, it will show continued benefits of its crackdown on password sharing and a strong original content slate. In short, investors are positioned for another blowout quarter from the streaming beast.

But, there is some concern creeping in on the Street on the back half of the year outlook for Netflix. The company will be cycling several impressive quarters from 2023 (meaning growth could slow), and investors know the bullish thesis very well.

What they may be missing are a few points brought to light by Deutsche Bank analyst Bryan Kraft this morning.

Here's what Kraft said in a client note:

"We believe that in order for the stock to appreciate further, consensus estimates for 2024-2025 will need to be revised higher, as we believe a lot is already priced in at these valuation levels. We think incremental subscriber growth from paid sharing will continue into this year, but at some point in 2024 will normalize at a lower level of net additions, with an ongoing benefit from a larger total addressable market and a less leaky customer acquisition funnel. Exactly when net addition normalize in 2024 is an open question since only management knows how large the base of unpaid sharers is that have not yet been forced to decide between paying or losing access to Netflix."

More on what to watch from Netflix earnings from yours truly down below.

Investors still not getting it on interest rates

Wed, April 17, 2024 at 7:00 a.m. EDT, Brian Sozzi

A good amount of focus this morning in markets is on what Fed chief Jerome Powell said on Tuesday, that it will "take longer than expected" to get inflation down to the Fed's 2% target.

Lost in the Powell focus, though, were even more hawkish comments from Fed vice chair Philip Jefferson.

“If incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer. I am fully committed to getting inflation back to 2%," Jefferson said.

In the wake of this commentary, fed funds futures are now pricing in only 40 basis points of rate cuts by year-end. Deutsche Bank points out this is the lowest this has been so far in this cycle.

But I have to wonder if investors are truly getting that the Fed is unlikely to cut interest rates at all this year! Check out the CME Fed Watch tool below for the Fed's December meeting. More people are looking for rate cuts than those expecting rates to be at the same level they are today.

Investors are still hoping for rate cuts in 2024. (CME Fed Watch)

By the numbers: An early look at earnings season

Wed, April 17, 2024 at 6:45 a.m. EDT, Brian Sozzi

All in all, earnings season has started well. But interestingly, investors may have priced it in months ago.

To date, 43 S&P 500 companies have reported first quarter results. Reported sales growth has been a solid 4.5%, and earnings have expanded quicker by 8.8% (despite sticky inflation weighing on profit margins).

However, despite the solid growth rates, the average stock price dropped 1.2% after the results, according to data crunched by Evercore ISI strategist Julian Emanuel.

Companies beating on both the top and bottom lines have seen their stock rise only 0.6% after the results. Companies that have missed on both the top and bottom lines (known as double misses) have seen their stock price hammered by 10.4% on average.

And we're back again on Tesla

Wed, April 17, 2024 at 6:31 a.m. EDT, Brian Sozzi

I can't get enough of this Tesla (TSLA) fall-from-grace story!

So I am back (see 6:00 a.m. post below) with a new piece of research that just came my way on Tesla from Deutsche Bank auto analyst Emmanuel Rosner. I loved this title on his Tesla section: "Clarity Needed on Future Direction of the Company."

Perfectly said, and most others on the Street would agree.

Here's what Rosner said, which goes a long way in explaining why Tesla's stock has gotten run over:

"Perhaps most importantly, we view recent sequence of Tesla news as potentially thesis-changing for investors. With still many questions unanswered, it may be too early to tell if it is particularly bearish, or just neutral. As of now, it is unclear if a drivable version of Model 2 is still coming and if so when; how far along is robotaxi in its development and what a realistic timeline for deployment is in light of considerable technology and regulatory hurdles ahead. We expect Tesla to have to comment on these on its upcoming earnings call. Unfortunately, if Tesla were to confirm that its renewed robotaxi focus comes at the expense of Model 2, we believe this would introduce considerably higher risk profile for the stock, and remove a key reason many shareholders currently own the stock. More critically, this change in strategy would also make any upside from here tied to Tesla cracking the code on full driverless autonomy, which represents a significant technological and regulatory challenge.

"All in, we await clarity from Tesla on any change in strategy. If Robotaxi is being accelerated with no focus or timeline change for Model 2, this may be perceived as a positive signal of Tesla’s confidence in its autonomous technology and could potentially be accretive to out year estimates. If, however, Model 2 is being pushed out or canceled, we would view it as completely thesis-changing, as we worry about Tesla’s new execution risk profile, see considerable downside risk to 2026+ earnings estimates, and believe the stock would need to undergo a potentially painful shift in ownership base, with investors focused on Tesla’s EV volume domination and cost advantage potentially throwing in the towel, and eventually replaced by AI/tech investors with considerably longer time horizons."

Check out where these former pandemic stock darlings now trade!

Wed, April 17, 2024 at 6:15 a.m. EDT, Brian Sozzi

The rise in broader market volatility in the past week hasn't been kind to two former pandemic stock darlings.

Shares of Zoom (ZM) hit a fresh low on Tuesday, down about 90% from their October 2020 peak. Not much buying at these lows is happening in the premarket today.

Blame return to office for Zoom's fall from grace. (Yahoo Finance)

Meanwhile, shares of Peloton (PTON) also hit fresh lows on Tuesday. The stock has crashed 98% since its December 2020 highs as people have returned to pumping iron in $50-a-month gyms.

Shares have Peloton keep cycling lower. (Yahoo Finance)

One chart on Tesla says it all

Wed, April 17, 2024 at 6:00 a.m. EDT, Brian Sozzi

Tesla (TSLA) has had an awful start to 2024. Full stop.

Layoff news this week was more widespread than initially thought. Analysts are chopping estimates going into the EV company's coming earnings release. Cybertruck deliveries are reportedly being delayed. And Musk scrapped the cheap Tesla he has long promised.

The chart below from RBC Capital Markets this morning (where RBC joined other banks and cut their estimates on Tesla) nicely captures the entirety of this mess.

The Tesla stock struggles continue. (RBC Capital Markets)