The Dow Jones Industrial Average declined and the broader stock market collapsed as Federal Reserve Chair Jerome Powell issued a dovish outlook amid spreading inflation. Tesla (TSLA) saw strong gains fade after the gain. Elon Musk unveiled a plan for which a takeover bid will be made Twitter (TWTR). Netflix (NFLX) kept crashing Verizon Communications (VZ) tested a buy point.
X
Volume was higher on both the New York Stock Exchange and Nasdaq, according to initial data. This is negative on a bad day. Volatility was also higher, with the Cboe Volatility Index, or VIX, up 13%.
Meanwhile, the yield on the benchmark 10-year Treasury rose six points to 2.9%. Oil was also up, with West Texas Intermediate Crude up 1.4% to nearly $104 a barrel.
Powell says this about inflation
With inflation unseen in decades, the Fed’s Powell is becoming increasingly tight-lipped about tackling the problem.
He took a podium discussion of the International Monetary Fund as an opportunity to give further signals on the forthcoming interest rate hikes.
Powell signaled that a 50 basis point, or half a percentage point, hike is likely when the FOMC meets next month.
He said it was “appropriate” that the central bank was raising rates “a little faster” than in the recent past. Powell also pointed out that “there’s something about the idea of front-end loading” in removing stimuli. “It is absolutely necessary to restore price stability,” Powell said.
Nasdaq under pressure as yields soar
The Nasdaq saw a strong open give way to a painful close as it ended the session down 2.1%. This came after it was reversed at the 50-day moving average. align technology (ALGN) was the worst performer, falling 8.5%.
The S&P 500 also reversed lower, ending the day down 1.5%. Enphase Energy (ENPH) was the worst performer, down 12.4%. Freeport-McMoRan (FCX) also struggled, giving up 9.9%.
Overview of today’s US stock market | ||||
|---|---|---|---|---|
| index | symbol | Price | loss of gain | % To change |
| Dow Jones | (0DJIA) | 34792.30 | -368.49 | -1.05 |
| S&P500 | (0S&P5) | 4393.79 | -65.66 | -1.47 |
| Nasdaq | (0NDQC) | 13174.65 | -278.42 | -2.07 |
| Russell 2000 | (IWM) | 197.76 | -4.57 | -2.26 |
| IBD 50 | (FFTY) | 35.40 | -1.28 | -3.49 |
Last updated: 4:06 PM ET 4/21/2022 | ||||
The S&P sectors were all negative. Consumer staples were the best performers, while communication services and energy suffered the largest losses.
Small caps were also hit hard, with the Russell 2000 down 2.3%.
But it’s been growth stocks that have been hit hardest by the angry bears. The innovator IBD 50 ETF (FFTY), a trailblazer for growth stocks, plunged 3.5%.
Dow Jones Today: Chevron Crushes as Oil Gains
The Dow Jones Industrial Average was forced down almost 370 points as it lost 1.1%.
rafters (CVX) was one of the biggest laggards, down 4.6%. It ended just below Foreclosure (CRM), which declined 4.8%.
dow inc (DOW) was the best performer, up 2.9%, although it hurt gains. It closed above its buy zone on a cup with a handle entry of 65.04, according to MarketSmith analysis. The company beat earnings estimates.
Tesla profits are melting away
EV maker Tesla sprinted off the starting blocks with strong results, only to be pushed back by the broader onslaught. It ended the day up 3.2%.
Quarterly earnings rose 246% to $3.22 per share, well above the FactSet consensus of $2.26. Revenue rose 81% to $18.76 billion versus the consensus of $17.595 billion. It remains a long way from an entry of 1,152.97.
Tesla said factories have been running below capacity for several quarters due to supply chain issues and expects this to continue through the end of 2022. Issues at its Shanghai gigafactory were also raised.
“While weekly production rates were strong in the first quarter, a surge in Covid-19 cases in Shanghai led to the temporary closure of our factory and parts of our supply chain,” the company said in a release. “Although limited production has recently resumed, we continue to monitor the situation closely.”
Elon Musk eyes Twitter tender
Meanwhile, Tesla CEO Elon Musk continues his bid to take over Twitter. An updated SEC filing released Thursday showed the eccentric billionaire is now directly considering a takeover bid for some or all of the shares from shareholders.
According to the filing, he has $46.5 billion in commitments to fund a deal. It includes $25.5 billion in debt financing from companies including Morgan Stanley Senior Funding and Bank of America.
It comes after Musk made an offer last week to buy Twitter for $54.20 a share. This would value the company at about $43 billion. The Twitter board responded by launching a so-called poison pill to ward off Musk.
Netflix stock falls again
Netflix continued to fall, although nowhere as sharply as on Wednesday. It closed the session down 3.5%.
The stock took another hit after it was announced that billionaire Bill Ackman had to sell his firm Pershing Square Holdings’ entire investment in the streaming company just three months after the announcement.
“We have lost confidence in our ability to predict with reasonable certainty the future prospects of the company,” Ackman said in a letter to investors.
The more than 3 million shares that Pershing Square owned in the company were sold at an estimated loss of around $400 million.
Investors dumped Netflix stock after the company reported losing 200,000 subscribers in the first quarter. Wall Street and the company’s own forecast had forecast 2.5 million new subscribers for that period.
Additionally, it forecasts the loss of 2 million subscribers in the second quarter. It ended the March quarter with 221.6 million subscribers worldwide.
What to do after the market reversal? Tesla cuts profit
This stock crosses the buy point
Despite the difficult action, Verizon Communications broke out of a base. The stock ended in a buy zone after surpassing a cup and handle buy point of 55.80. The relative strength line has peaked and may soon surpass consolidation highs.
Volume on the go was above average, which is a plus. Still, it has outperformed by at least 40% on a breakout below the ideal volume increase.
A major reason for caution is that pre-open profits are due tomorrow. One approach is to use options as a strategy to reduce risk related to gains. It’s a way to capture the upside potential of a stock’s price action around earnings while reducing risk.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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