The Dow Jones Industrial Average pared gains to trade nearly 1.5% higher in afternoon trading on Thursday. Strong earnings reports from Caterpillar (CAT), Honeywell (HON) and McDonald’s (MCD) drove the blue chip index higher.
X
The S&P 500 traded flat after rising nearly 1%, stuck below resistance at its 50-day moving average. The Nasdaq composite is down nearly 1%, even though the Russell 2000 small-cap index is higher by more than 1%.
Crude oil rose over 1% to trade at $89.27 per barrel. The yield on the 10-year Treasury note sliced through the psychological 4% level, falling to 3.92%.
Volume was lower on the NYSE and the Nasdaq compared to the same time on Wednesday.
U.S. GDP grew to 2.6% in the third quarter, reversing two quarters of contraction earlier this year.
Initial jobless claims rose slightly to 217,000 from 214,000 last week. The four-week average rose to 219,000. Last week’s numbers were unchanged.
Facebook-parent Meta sold off heavily after the company projected a major 2023 expense budget, despite slumping growth and constrained advertising revenues. The stock is now trading at a six-year low.
The sell-off follows bearish reports from Alphabet (GOOGL) and Dow Jones component Microsoft (MSFT) earlier this week.
Apple’s Earnings On Deck
Dow Jones component Apple (AAPL) reports fiscal Q4 results after Thursday’s closing bell, with analysts looking for a profit of $1.27 per share on $88.8 billion in revenue. Sales are expected to grow just 6.5% year over year. AAPL shares are testing their 10-day moving average.
The company saw strong sales for its premium iPhones for the quarter, according to The Wall Street Journal. In July, the tech titan said its iPhone sales continued to grow despite China lockdowns and slowing consumer demand.
However, quarterly earnings growth has been decelerating since peaking at 119% growth in March 2021. That percentage has stair-stepped lower in the last five quarters, descending to 110%, 70%, 25%, 9% and shrinking to -9% in June.
This reverse momentum is a dangerous signal for the broad market after major blowups at Microsoft, Alphabet and Meta.
How can a rally attempt gain ground when the most widely-held stocks spiral into bear market declines?
Dow Jones Leader Intel Earnings
Slowing PC demand will likely hurt Intel‘s (INTC) numbers, due out after the close.
FactSet’s estimates suggest a steep 21% revenue decline to $15 billion, with net income falling a staggering 93% to $494 million. The chipmaking stalwart raised $861 million from the Mobileye (MBLY) IPO on Wednesday. INTC is off over 1% in late trading on Thursday.
Also on deck, Amazon‘s (AMZN) cloud and ad business will likely offset its slowing e-commerce business, but weakening Azure growth at Microsoft could signal trouble in that market. Shares have fallen over 3% in the afternoon.
Biotechnology leader and IBD Leaderboard stock Vertex (VRTX) is also on deck. Shares fell through a buy point of 306.05 in a flat base, dropping over 7% and triggering a sell signal. They have undercut their 50-day line this afternoon.
Other Solid Earnings On Dow Jones
Dow Jones component McDonald’s posted a sound third quarter, with revenue of $5.87 billion and $2.68 EPS. The fast food giant has been on a four-day winning streak and is approaching a buy point of 271.25.
Peer Dow stocks and industrial giants Caterpillar and Honeywell also surged after beating views.
Caterpillar’s sales grew 21% to $15 billion, with adjusted profit of $3.95 per share. Honeywell raised its outlook after reporting $8.9 billion sales and $2.28 earnings per share. In health care, Merck (MRK) rose 2% after beating views. Caterpillar gapped up 9% while Honeywell surged more than 4% earlier today. Both have held their gains in late trading.
On Wednesday, gas stations and convenience stores operator Murphy USA (MUSA) reported third quarter net income of $219.5 million, with earnings of $9.28 per share, compared to $104 million and $3.98 per share, respectively, last year.
MUSA shares are breaking out above a buy point at 303.19 in a flat base.
In health care, Molina (MOH) beat views on Wednesday with $7.9 billion sales and earnings of $4.36 per share. MOH fell over 3% in late trading. Watch for sell signals if the trend should persist.
Stocks Breaking Out Today
The Innovator IBD 50 (FFTY) ETF rose 0.5%.
Arch Capital (ACGL) is breaking out of consolidation with a buy point of 50.83.
BP (BP) is in a cup-with-handle base and is breaking out past the 32.98 buy point.
Be sure to follow Vidya Ramakrishnan @IBD_Vidya on Twitter for more stock market news.
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