Here are five things you must know for Thursday, Jan. 28:
Stocks tumbled Wednesday, posting their biggest drop since October, as shares of technology giants fell sharply and Federal Reserve Chairman Jerome Powell was cautious about the outlook for a U.S. economic recovery. The Dow fell 633 points, or 2.05%, the S&P 500 declined 2.57% and the Nasdaq slumped 2.61%.
“We think it’s going to be a struggle,” Powell said Wednesday. “The pandemic still provides considerable downside risks to the economy.”
The Fed announced Wednesday, as expected, that it was keeping interest rates near zero and maintaining its bond-buying program at the current pace of $120 billion a month amid signs an economic recovery “has moderated in recent months.”
“Going forward, we believe that the Fed needs to stay the course because we don’t have the macro environment for the market to sustain itself,” said David W. Wagner, portfolio manager and analyst at Aptus Capital Advisors. “The market is still using crutches as it’s not fully healed – that’s apparent given that there are so many Americans worse off relative to where they were last year. There are 9 million Americans still unemployed – more than what we saw during the financial crisis.”
Investor anxiety also was heightened by the mania gripping heavily shorted shares, such as GameStop (GME) – Get Report, which has soared more than 400% this week as retail traders bid up the stock and big Wall Street firms have bailed.
2. — WallStreetBets Returns After Briefly Going Private
WallStreetBets, the internet forum that has been tied to huge surges in GameStop, AMC Entertainment (AMC) – Get Report and other heavily shorted stocks, briefly turned itself off to new users after its online voice and messaging group on Discord was banned.
In a post late Wednesday after new members were again allowed to join, the WallStreetBets moderators said they had seen overwhelming interest following huge short-squeeze surges in GameStop in recent days. Bloomberg noted that WallStreetBets had racked up more than 3 million members.
Discord said it removed WallStreetBets because the site had allowed “hateful and discriminatory content after repeated warnings” and wasn’t related to the surge in GameStop.
GameStop, AMC and Nokia (NOK) – Get Report – stocks favored by WallStreetBets members – fell sharply after the WallStreetBets server was removed. GameStop was up 6.82% in premarket trading, AMC dropped 8.44% and Nokia declined more than 17%.
The massive rallies in these stocks has caught the attention of the Biden administration and the Securities and Exchange Commission, which said it “actively monitoring the ongoing market volatility in the options and equities markets.”
3. — Tesla Tumbles After Earnings Miss
Tesla ((TSLA)) – Get Report was tumbling in premarket trading Thursday after the electric vehicle company reported a sixth consecutive quarter of profit that, however, was well below Wall Street expectations.
The stock fell 5.92% to $813.
Operating margins dropped to 5.4% in the fourth quarter, down from 9.2% in the previous three-months period.
Sales rose 46% in the fourth quarter to $10.74 billion and beat forecasts of $10.47 billion, with Tesla citing “substantial growth” in deliveries.
Tesla said it sees deliveries growing at least 50% in 2021. While Tesla wasn’t specific in its guidance, a growth rate of 50% would mean more than 750,000 units. The company delivered almost 500,000 vehicles globally in 2020.
4. — Apple Posts Quarterly Revenue of $100 Million for the First Time
Apple (AAPL) – Get Report posted stronger-than-expected fiscal first-quarter earnings and quarterly revenue of more than $100 million for the first time thanks in part to surging China sales and demand for its new iphone-12.
Apple earned $1.68 a share in the quarter, beating analysts’ forecasts of $1.41. Sales of $111.4 billion, a quarterly all-time high, topped expectations of $103.3 billion.
China revenue surged 56% to $21.3 billion, helping iPhone revenue rise 17% to $65.5 billion. Services revenue rose 24.2% to $15.8 billion.
“Our December quarter business performance was fueled by double-digit growth in each product category, which drove all-time revenue records in each of our geographic segments and an all-time high for our installed base of active devices,” said Luca Maestri, Apple’s chief financial officer. “These results helped us generate record operating cash flow of $38.8 billion.”
Shares of Apple fell 2.6% to $138.37 in premarket trading Thursday, likely because the company issued a cautious outlook. Executives said sales growth from AirPods and other wearables will decelerate in the second quarter, and warned that services sales in the period will face tougher comparisons with a year earlier, Bloomberg reported.
“Overall, this was a very strong release with across-the-board beats, robust margin performance and great cash flow,” said Jim Cramer and the Action Alerts PLUS team, which holds Apple in its portfolio.
5. — Thursday’s Calendar: McDonald’s Earnings, Jobless Claims
Earnings are expected Thursday from McDonald’s (MCD) – Get Report, Dow Inc. (DOW) – Get Report, American Airlines ((AAL)) – Get Report, Southwest Airlines (LUV) – Get Report, Comcast (CMCSA) – Get Report, Altria (MO) – Get Report, Mastercard (MA) – Get Report, Visa (V) – Get Report, Mondelez International (MDLZ) – Get Report, Western Digital (WDC) – Get Report, Stanley Black & Decker (SWK) – Get Report, Tractor Supply (TSCO) – Get Report, U.S. Steel (X) – Get Report and Northrop Grumman (NOC) – Get Report.
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The U.S. economic calendar on Thursday includes Gross Domestic Product for the fourth quarter at 8:30 a.m. ET, weekly Jobless Claims at 8:30 a.m., International Trade in Goods for December at 8:30 a.m. and New Home Sales for December at 10 a.m.