In a turbulent day for the stock market, the Dow Jones Industrial Average recorded a 252-point decline, with several tech giants, known as the “Magnificent Seven,” such as Apple (AAPL), Microsoft (MSFT), Tesla (TSLA), and Google parent Alphabet (GOOGL), facing significant setbacks.
Meta Platforms (META) suffered a substantial drop following an Israel-Hamas warning, while Amazon.com (AMZN) saw an uptick in extended trading after exceeding earnings expectations. Notably, Warren Buffett increased his holdings in a key stock.
Despite the overall challenging environment, three stocks managed to hold their ground near buy points amidst the market turmoil: Baker Hughes (BKR), EQT (EQT), and Packaging Corp. Of America (PKG).
Positive GDP Growth Amid Uncertainty Third-quarter gross domestic product (GDP) reported a year-over-year growth of 4.9%, a substantial increase compared to the second-quarter growth of 2.1%, according to data from the Commerce Department. This exceeded economists’ expectations of a 4.2% rise and marked the most significant gain since the fourth quarter of 2021. Despite this robust growth, the CME FedWatch Tool indicates that the Federal Reserve is likely to maintain interest rates at the next policy meeting.
On the other hand, initial unemployment claims rose by 10,000 to 210,000, as reported by the Labor Department. This slight increase exceeded analysts’ projections of 207,000 new claims.
Edward Moya, a senior market analyst at Oanda, noted that investors are currently navigating a complex economic landscape. He stated, “It looks like the latest round of data suggests CAPEX (capital expenditure) spending is tumbling and ‘higher interest rates for longer’ is not going away just yet. Wall Street hasn’t been impressed with big-tech earnings so far, and the remaining ones, Amazon and Apple, will likely struggle given the weakening outlook for the U.S. economy.” Moya also pointed out that strong demand for the seven-year Treasury note auction indicates ongoing concerns about geopolitical risks.
Nasdaq Struggles as Tech Stocks Face Challenges Among the major stock indexes, the tech-heavy Nasdaq experienced the most substantial decline, closing near session lows with a 1.8% drop. Align Technology (ALGN) took a substantial hit, plummeting by 24.9% after failing to meet Wall Street’s third-quarter expectations.
The S&P 500 also faced late-session selling pressure, resulting in a 1.2% decline. Whirlpool (WHR) notably fell by 15.8% due to disappointing guidance.
Within the S&P 500 sectors, real estate and utilities fared relatively well, while technology and communication services sectors encountered the most significant challenges.
Despite the challenging market conditions, small-cap stocks outperformed, with the Russell 2000 rising by 0.3%. However, growth stocks experienced a decline, as the Innovator IBD 50 ETF (FFTY) fell by 2%.
Dow Jones Highlights: IBM’s Positive Earnings, Boeing’s Resilience The Dow Jones Industrial Average attempted to stage a recovery but ultimately faced a downward push, resulting in a 252-point loss or a 0.8% decline.
International Business Machines (IBM) outperformed, surging by 4.9% after reporting third-quarter results that exceeded analyst expectations. Verizon Communications (VZ), Boeing (BA), and Merck (MRK) also performed well, with VZ rising by 2.3%, BA gaining 0.8%, and MRK increasing by 1.9%. However, outside of the “Magnificent Seven” stocks, Nike (NKE) faced the most significant decline, falling by 3.4%, while Visa (V) struggled with a 2.4% drop.
Meta Stock Faces Challenges After Earnings Report Meta Platforms, despite surpassing Q3 earnings and revenue estimates, faced a 3.7% decline. This drop was primarily attributed to CFO Susan Li’s warning regarding potential softness in advertising due to the Israel-Hamas conflict. Li stated that while the company doesn’t have significant direct revenue exposure to Israel in the Middle East, there has been a noticeable reduction in ad spending correlated with the conflict, impacting the Q4 revenue outlook. CEO Mark Zuckerberg highlighted the positive aspects of the company’s performance, including the launch of products like the Quest 3 headset, Ray-Ban Meta smart glasses, and its AI studio.
The bearish market reaction to Meta’s earnings caused the stock’s exposure to be reduced on IBD’s Leaderboard list of selected stocks.
Struggles for the “Magnificent Seven” The tech giants that make up the “Magnificent Seven” faced notable challenges on this turbulent day. Apple stock dipped by 2.5% and fell below its 200-day moving average. Microsoft stock lost ground after reaching a cup base entry point of 366.78, experiencing a 3.8% decline but remaining above its 50-day moving average. Tesla stock also dipped by 3.1%, falling below its 200-day moving average, marking a 14% decline in the past month. Google parent Alphabet saw a 2.7% drop, adding to the previous session’s 9.5% decline, resulting in a 9.8% decline for the week. Piper Sandler analyst Thomas Champion suggested that Alphabet’s and Microsoft’s reports indicate a more realistic “flattish” growth, and investor expectations have reset accordingly.
Nvidia faced challenges as it closed near session lows with a 3.5% dip, while continuing to consolidate below its 50-day moving average.
Amazon’s Earnings Beat Expectations Amazon posted its earnings after trading hours, revealing earnings of 94 cents per share and revenue of $143.1 billion. This surpassed EPS estimates, rising by 190% to 58 cents, and exceeded revenue projections, increasing by 11.4% to $141.53 billion according to Zacks Investment Research. While Amazon Web Services revenue fell slightly short of expectations, advertising revenue exceeded forecasts. Amazon Web Services growth remains a crucial metric for the company. Amazon stock declined by 1.3% during regular trading but rose nearly 2% in after-hours trading, maintaining its position above the 200-day moving average.
Warren Buffett’s Stake Increase Warren Buffett, CEO of Berkshire Hathaway (BRKB), increased the firm’s stake in Occidental Petroleum (OXY) by 3.9 million shares, bringing the total holdings to 228 million shares. This purchase was made between Monday and Wednesday, as reported in a filing with the Securities and Exchange Commission. Last year, Berkshire received regulatory approval to acquire up to 50% of the oil giant and now holds just under 26
