Stocks rose slightly above the zero line on Thursday, trying to recover from a selloff as Treasury yields rose and investors awaited a speech from Federal Reserve Chairman Jerome Powell.
The Dow Jones Industrial Average (^DJI) was just above zero, while the benchmark S&P 500 (^GSPC) gained 0.1%. The tech-heavy Nasdaq Composite (^IXIC) led the way with a gain of 0.2%.
Treasury yields rose for a fourth straight day, keeping pressure on stocks as investors closely watched developments in the Middle East conflict.
The benchmark 10-year yield (^TNX) reached just under 5% for the first time in 16 years, while the 2-year yield – which is used as a guide to interest rate expectations – hit its highest level since at around 5.24% 2006 jumped. .
Powell’s comments on Thursday will be scrutinized for signs that the Fed plans to raise interest rates again this year as the U.S. economy proves resilient. With this in mind, some strategists are wondering whether it is time for the central bank to raise its inflation target.
Read more: What a Fed pause on rate hikes means for bank accounts, CDs, loans and credit cards
Investors are also paying attention to the potential impact of increased interest rates on company performance as third-quarter earnings season progresses.
Tesla (TSLA) CEO Elon Musk said Wednesday he was concerned that higher borrowing costs would deter customers from affording the company’s electric vehicles after the company’s earnings fell short of estimates. Tesla shares fell nearly 8% in early trading.
Meanwhile, shares of Netflix (NFLX) rose around 14% at the opening bell after the streamer reported a surge in subscribers and said it would raise prices in the US.
Earnings were underwhelming Thursday morning, and American Airlines (AAL) shares rose as the company reported record third-quarter revenue. AT&T (T) shares soared as the company added more wireless customers than Wall Street expected.
In economic data, weekly jobless claims hit their lowest level since January as the U.S. labor market continues to show strength.
JTesla shares slide after third-quarter earnings announcement
Shares of Tesla (TSLA) fell more than 8% on Thursday in response to the company’s latest quarterly earnings release.
Yahoo Finance’s Pras Subramanian reports:
The electric vehicle maker missed both sales and earnings, although the company announced that Cybertruck deliveries are scheduled for November 30 of this year.
For the quarter, Tesla reported revenue of $23.4 billion, missing analysts’ estimates of $24.06 billion; However, sales increased by 13% compared to the previous year. From a profitability perspective, Tesla reported adjusted earnings per share (EPS) of $0.66 versus the expected $0.74 and adjusted net income of $2.3 billion versus the expected $2.56 billion .
The decline in profitability could be due to expected downward pressure on margins since Tesla began its cost-cutting efforts late last year. Tesla reported third-quarter gross margin of 17.9%, slightly missing Wall Street estimates of 18.0%. Last quarter, Tesla reported a gross margin of 18.2%.
“The district itself supplied cars [gross margin] (excluding loans) of 16.3% versus the Street of 17.6% with margins expected to stabilize in the coming quarters. “However, Tesla is not committing to an end to price cuts and that is a major concern and overhang for the stock in the near term,” Wedbush analyst Dan Ives wrote in a note published Thursday morning. Wedbush lowered its Tesla price target from $350 to $310 following third-quarter results.
Looking ahead to future products, Tesla said Cybertruck deliveries remain on track for later this year Deliveries begin November 30th. In the conference call, Musk said it would take a year to 18 months for the Cybertruck to become cash flow positive and that he expected a production rate of 250,000 units per year by 2025. Musk added that Tesla will face “tremendous challenges” in achieving mass production of the Cybertruck.
“We expect the 3Q report to add to investor concerns in the short to medium term as the company comments that the current macroeconomic backdrop/higher interest rates could slow its growth (including the speed at which factories ramp up ), and comments that the initial Cybertruck ramp-up could be “slow,” Goldman analyst Mark Delaney wrote in a note to investors. Following the Q3 report, Delaney subsequently lowered his Tesla price target from $265 to $235.
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Stocks open higher
Stocks were in the green at the open on Thursday as investors digested mixed earnings results from Big Tech companies and awaited a key speech from Federal Reserve Chairman Jerome Powell.
The Dow Jones Industrial Average (^DJI) was just above zero, while the benchmark S&P 500 (^GSPC) gained 0.1%. The tech-heavy Nasdaq Composite (^IXIC) led the way with a gain of 0.2%.
Government bond yields rose. The 30-year Treasury yield (^TYX) reached over 5%, while the 10-year Treasury yield (^TNX) climbed above 4.9%, near its highest level since 2006.
Netflix, AT&T and Peloton: Stock trends in premarket trading
Here are some of the stocks topping Yahoo Finance’s trend ticker page in premarket trading on Thursday:
Netflix (NFLX): Shares rose 13% in premarket trading on Thursday after the company reported a nearly 9 million increase in subscribers in the third quarter.
AT&T Inc. (T): Shares rose 4% premarket after the company raised its annual free cash flow forecast and quarterly subscriber gains beat estimates.
Peloton (PTON): Shares fell over 5%. The fitness company announced its partnership with the NBA and WNBA for the upcoming season on Wednesday.
Nokia Oyj (NOK): Nokia’s share price fell 4% on Thursday. Nokia said it would cut up to 14,000 jobs to cut costs.
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Stock futures were little changed as Powell’s speech loomed
U.S. stock futures hovered above the zero line on Thursday as U.S. Treasury yields continued to rise and gains increased as investors awaited comments from Federal Reserve Chairman Jerome Powell.
Dow Jones Industrial Average futures (^DJI) rose 0.03%, or 11 points, while S&P 500 futures (^GSPC) rose 0.06%. Contracts on the tech-heavy Nasdaq 100 (^NDX) rose 0.21%.
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