Dow Jones Falls Sharply As Google, Microsoft Earnings Loom; First Republic Craters
The Dow Jones Industrial Average tumbled as the stock market got hit by negative quarterly reports, including from McDonald's (MCD). Google parent Alphabet (GOOGL) and Microsoft (MSFT) fell as they get set to post earnings. First Republic Bank (FRC) cratered.
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Only one stock attempted a breakout amid the negative action. Fiserv (FISV) raced past a buy point after it posted an earnings beat.
Treasury yields skidded amid the negative action. The 10-year yield dipped 11 basis point to 3.34% while the two-year yield plunged 18 basis points to 3.96%, suggesting a flight to safety.
Oanda senior market analyst Edward Moya said a multitude of factors were contributing to the day's declines.
"U.S. stocks are softening after a mixed bag of earnings was accompanied by the return of banking jitters and news that President Biden will run for reelection," he said in a note to clients.
Nasdaq Hit As Small Caps Suffer
The Nasdaq was getting slammed, plunging nearly 2%. Zscaler (ZS) was a laggard here as it knifed almost 8% lower.
The benchmark S&P 500 was also getting mauled as it fell more than 1%. Finance stock MSCI (MSCI) was among the worst performers here as it dived 11% on mixed quarterly results.
The S&P 500 sectors were all under water. Energy and materials were the worst performers while the defensive utilities and consumer staples areas fell the least.
Small caps were getting bitten badly by the bears, with the Russell 2000 down more than 2%. Growth stocks were also getting hit, with the Innovator IBD 50 ETF (FFTY) down over 2%.
Dow Jones Today: McDonald's Earnings Beat, Stock Falls
The Dow Jones was faring best out of the major indexes, but still slid more than 300 points, or 1%.
Component McDonald's stock failed to get a boost on strong earnings. EPS popped 15% to $2.63 per share while revenue rose 4.1% to $5.89 billion. The firm topped analyst views while traffic rose despite higher menu prices.
But the stock responded poorly to management reiterating a warning that the U.S. and Europe could be affected by recession later in 2023. While it fell around 1% McDonald's stock remains in a buy zone above a 281.77 entry, MarketSmith analysis shows.
Johnson & Johnson (JNJ) fared best on the Dow Jones today as it gained almost 1%. Dow Inc. (DOW) lagged as it fell 5%.
Google, Microsoft Earnings Due; Alphabet Stock Slides
A couple of key Big Tech earnings are due after the close.
Earnings at Google parent Alphabet are seen falling 14% to $1.07 per share. Revenue is expected to rise 1.3% to $68.9 billion.
Investors will be keen for more information on how well the firm's core internet search-related digital advertising business is holding up.
GOOGL stock fell more than 1% and is trading below a cup-with-handle entry of 106.69.
Microsoft earnings are also due late Tuesday. Wall Street expects EPS to grow 1% to $2.24. Revenue is seen rising 3% to $51.1 billion.
The stock has been boosted lately by moves into artificial intelligence, but investors will also keenly focus on the company's Azure cloud computing business.
Growth in Microsoft's PC software business has been hampered by weak PC sales.
Microsoft stock was down nearly 2%. It is now trading just below a flat base entry of 276.86.
First Republic Stock Craters On Deposit Flight
First Republic Bank stock gave up all of Monday's gains and more as it did a swan dive following its earnings report.
Its $1.23 EPS was well clear of analyst views while $1.21 billion in sales was also better than expected.
But the stock was hammered on a near 41% decline in deposits to $104.5 billion. The firm said in its earnings release that it is "pursuing strategic options" to stabilize itself.
FRC stock lost even more ground on its major moving averages as it fell more than 40%. Trading was halted amid the high-volume sell-off and it also hit a record low. The San Francisco-based bank is now down more than 92% so far in 2023.
Sell Signals Galore Amid Stock Market Sell-Off
With today's negative action it is crucial that investors keep on top of sell signals.
Lattice Semiconductor (LSCC), Cadence Design Systems (CDNS), Synopsys (SNPS) and Workday (WDAY) all fell below the 50-day moving average.
Palo Alto Networks (PANW) also got the boot from the prestigious IBD Leaderboard list of top stocks after undercutting its 50-day line.
Rambus (RMBS) was also cut loose from Leaderboard after it round-tripped gains from a 46.26 entry and dipped under its 50-day line.
Outside Dow Jones: Fiserv Stock Tests Buy Point
While the action was generally negative, there was one plucky stock making a breakout attempt.
Fiserv stock is trading in a buy zone above a flat base entry of 119.58. The relative strength line hit a fresh high and volume was well above average.
The stock climbed after earnings popped 13% to $1.58 per share. The payments stock hiked its outlook for 2023. First it lifted projected organic revenue growth to 8%-9% from its previously announced estimate of 7%-9% growth.
It also guided for adjusted earnings per share of $7.30-$7.40, while analysts had expected $7.33.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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Source: Investor's Business Daily
