Dow Jones Drops As McCarthy, Yellen Raise Worries; Tesla Rival Falls On China Demand

The Dow Jones Industrial Average fell 0.8% at noon ET Wednesday as the stock market monitored talks on the debt ceiling and some top stocks hit sell signals.




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Late Tuesday, House Speaker Kevin McCarthy said negotiations were “nowhere near a deal yet” and backed off from short term solutions to raise the debt ceiling for a month or few weeks. The speaker observed that would only kick “the can down the road.” The minutes of the Fed’s most recent meeting will be released later today, which is another reason investors felt jitters at midday.

Treasury Secretary Janet Yellen reiterated today that the U.S. will almost certainly run short on cash in early June if the debt ceiling is not raised.

The S&P 500 also fell, losing 0.9%. Software stocks rose, but semiconductor company stocks such as Analog Devices (ADI) and Intuit (INTU) weighed the Nasdaq down. The tech-dominated index traded 0.9% lower at 12 p.m. ET.

Volume on the NYSE fell and was flat on the Nasdaq compared with the same time on Tuesday.

The small-cap Russell 2000 lagged with a loss of 1.2%. The growth stocks-focused Innovator IBD 50 (FFTY) ETF fell over 1%.

Crude oil rose over 2% to trade at $74.48 per barrel. Oil rose on tighter U.S. supply and indications of possible further OPEC+ production cuts.

The yield on the benchmark 10-year Treasury note rose 1 basis point to 3.70%.

Among Dow Jones stocks, software leader Salesforce (CRM) rose modestly along with health care leaders UnitedHealth (UNH) and Merck (MRK).

Stocks Moving Today

Palo Alto Networks (PANW) rose after the cybersecurity firm beat fiscal Q3 earnings views on strong customer growth. Shares rebounded from the 50-day line as the stock holds within a longer consolidation with an entry at 213.73, according to IBD MarketSmith chart analysis. The stock also cleared resistance around 200.

Intuit (INTU) also beat earnings views but dived below its 50-day line on lower revenue. Volume was tracking more than six times its average.

Some top-rated stocks hit sell signals, however.

Lululemon (LULU) broke further below its 50-day moving average and is nearly 7% below its 371.36 buy point. The stock was removed from IBD Leaderboard today. Tecnoglass (TGLS) made a clear break of support after breaking below the 50-day line in heavy volume.

New Relic (NEWR) came close to a sell signal. The stock fell back below a buy point of 80.98 after the database and server monitoring software maker lowered its outlook for the current quarter.

Tesla (TSLA) rival Xpeng (XPEV) sold off on a lowered sales outlook. The company’s forecast took a hit from both China’s slogging recovery and stiff competition from other EV players, including Tesla and Warren Buffett-backed Byd (BYDDF).

A Citi report on Thursday assessing U.S. auto businesses found that Tesla led in brand loyalty at 67% versus an average 46%. Tesla shares are holding the 50-day line in a cup base with an entry at 207.89.

Stocks Not In Dow Jones Rising

Among homebuilders, Toll Brothers (TOL) rose 2% after a strong fiscal second quarter.

In retail, Kohl’s (KSS) rose but met resistance at the 50-day line. The company announced strong profits in its fiscal first quarter. Abercrombie & Fitch (ANF) soared 27%, vaulting over its 50-day line, after a surprise profit and raised sales forecasts. Urban Outfitters (URBN) broke out of consolidation at a 29.84 buy point, while Children’s Place (PLCE) dived on earnings, to an August 2020 low.

Chip leader Analog Devices (ADI) fell after the company beat earnings views but lowered its sales outlook for its fiscal third quarter. Shares have fallen below the 50-day line in heavy volume — a sell signal — and are poised to undercut their base.

Agilent (A) nose-dived after it gave a lower outlook that earned it a KeyBanc analyst downgrade to sector weight from overweight.

Earnings On Deck Today

Chip giant Nvidia (NVDA) and software data storage and analytics firm Snowflake (SNOW) are announcing earnings later today. Nvidia is on IBD Leaderboard. Revenue outlook for its data-center chips and generative AI tools is on watch.

On Tuesday, the Santa Clara, Calif., company entered into an agreement with Dow Jones leader Microsoft (MSFT) for enhancing generative AI for enterprises. Nvidia’s AI Enterprise software will be used for Microsoft’s Azure Machine Learning initiative.

Shares of Costco (COST) trended below the 50-day line ahead of earnings on Thursday.

Please follow VRamakrishnan on Twitter for more news on the stock market today.

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