U.S. Indexes Turn Lower After Weak Earnings Compound Economic Worries

Barry Adams
20 Apr, 2023
New York City

Stocks faced headwinds on earnings disappointments from several popular companies.

Benchmark indexes traded down after Tesla, Seagate Technology, AT&T and American Express reported weaker-than-expected earnings. 

Tech stocks led the decliners after Tesla reported a 24% fall in earnings and cut prices on several electric vehicle models. 

Seagate Technology also offered a downbeat outlook citing weak global demand. 

Lack of earnings guidance from several companies so far in the earnings season has also dented investor confidence. 

American Express reported a decline in earnings and the company sharply hiked its estimate of credit provision to $1.3 billion also soured mood on Wall Street. 

Market sentiment was weak after the Philadelphia Fed manufacturing index fell more than expected and fell to its lowest level since May 2020. 

Weak earnings guidance and falling earnings compounded to general macroeconomic worries and initial jobless claims edged up slightly at the end of last week. 

 

Jobless Claims Edged Higher

Unemployment claims for the last week highlighted the tight labor markets conditions despite multiple rate hikes by the Federal Reserve. 

Weekly initial jobless claims rose 5,000 to 245,000 for the week ending April 15, the U.S. Department of Labor reported Thursday. 

The previous week's claims were upwardly revised 1,000 to 240,000.   

The  4-week moving average decreased 500 to 239,750 from the previous week's revised average. The previous week's  average was revised up by 250 to 240,250.

The advance seasonally adjusted insured unemployment rate was 1.3% for the week ending April 8, an increase  of 0.1 percentage point from the previous week's unrevised rate.

 

Indexes & Yields 

The S&P 500 index fell 0.6% to 4,128.21 and the Nasdaq Composite index declined 0.6% to 12,085.63. 

The yield on 2-year Treasury notes declined to 4.17%, 10-year Treasury notes traded at 3.54% and 30-year Treasury bonds hovered near 3.75%.   

Crude oil futures price for immediate month delivery decreased $1.60 to $77.66 barrel and natural gas hovered near $2.20 a thermal unit. 

 

Stock Movers 

Tesla Inc decreased 8.3% to $165.67 after the electric vehicle maker reported a sharp fall in earnings in the first quarter. 

Revenue in the quarter rose 24% to $23.3 billion and net income declined 24% to $3.3 billion from $3.7 billion and diluted earnings per share fell to 95 cents from $1.07 a year ago. 

Vehicle deliveries increased 36% to 422,875 from 310,048 a year ago. 

American Express Company declined 3.7% to $158.96 after the payment processor said revenue rose but net income declined. 

Revenue in the first quarter increased 22% to $14.3 billion and net income fell 13% to $1.8 billion from $2.1 billion and diluted earnings per share declined to $2.40 from $2.73 a year ago. 

D R Horton Inc rose 6.9% to $108.87 after the home builder reported flat revenue and a decline in earnings. 

Revenue in the fiscal second quarter ending in March was flat $7.9 billion and net income plunged to $949 million from $1.4 billion and diluted earnings per share fell to $2.73 from $4.03 a year ago. 

Net sales orders for the fiscal second quarter fell 5% to 23,142 homes and 11% in value  to $8.6 billion compared to 24,340 homes and $9.7 billion in the same quarter a year ago.