Stocks Waver as Tesla, Alphabet Results Diverge

(Thursday market open) Investors begin the day digesting sweet and sour quarterly results from Alphabet (GOOGL) and Tesla (TSLA). Major indexes reflected the mixed outing, with earnings from Chipotle (CMG), Dow (DOW), and IBM (IBM) also in focus and Intel (INTC) later. Wednesday's trade deal with Japan helped light up the market, and the European Central Bank (ECB) kept rates unchanged today, as expected. Hopes rose for a tariff deal with the European Union as news outlets reported it might be close.

The Nasdaq Composite ($COMP) closed above 21,000 for the first time Wednesday while the Dow Jones Industrial Average ($DJI) clawed above 45,000. The DJIA starts just a bit below its all-time peak close from last December after getting a lift yesterday from industrial sector strength as GE Vernova (GEV) delivered strong earnings and guidance. "The AI/power secular growth story continued to be supportive for the bulls," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. Another supportive factor could be the labor picture, as initial jobless claims fell to a three-month low of 217,000.

Peterson sees a push-pull in the markets. On the one hand, the economy has been resilient, earnings are strong, and trade deals are a net benefit, at least so far. Technicals also remain bullish, he said. Bearish factors include "sell on the news" reactions to popular companies reporting earnings and weak seasonal factors. On another potentially bearish note, Treasury yields crept up this morning after the jobs data.

1. Meme stocks move like it's 2021 but caution flag waves: Shares of small or little-known company stocks climbed double-digits for no fundamental reason this week, summoning memories of the 2021 "meme" craze. Back then, stocks like GameStop (GME) and AMC Entertainment (AMC) enjoyed spikes fueled in part by historically low yields and fresh consumer demand as the pandemic waned. Treasury yields are much higher now and consumers have long spent most of their Covid checks, but stocks like Kohl's (KSS), Krispy Kreme (DNUT), Opendoor (OPEN), 1-800-FLOWERS (FLWS), and GoPro (GPRO) surged this week. The rallies may reflect the outsized influence of social media posters on heavily shorted stock. "This type of behavior can crop up when stocks are near highs and sentiment is heavily bullish," Schwab's Peterson said. "It's tough to say for certain that this suggests we're near a market top," he added, partly because the fundamental backdrop remains positive, especially with so much traction from secular growth stories like AI, power demand, and robotics. "Traders should approach these highly volatile names with caution," Peterson added. "They often move up on no fundamental news, and can reverse just as swiftly without warning, so a high level of risk tolerance is needed for these 'meme' stocks."
    
2. Companies face high expectations: With major indexes trading at all-time highs and price-to-earnings (P/E) ratios on the upper end of the historical range, companies are under heavy pressure to deliver positive results or face investor wrath. "Earnings misses are being punished more than earnings beats are being rewarded," said Liz Ann Sonders, chief investment strategist at Schwab. The latest example was Texas Instruments (TXN) falling double digits after a guidance shortfall earlier this week, though its quarterly results met or surpassed consensus. The bar for earnings success was set rather low as far as estimates this quarter, meaning failure to beat could be seen in an even more negative light.
    
3. U.S. automakers complain Japan has tariff advantage: Based on trade deals to date, tariffs appear to be in the 15% to 20% range, not the 10% some bulls had desired. U.S. auto companies complained that the 15% tariffs on Japanese car imports give Japan car makers an advantage over U.S. manufacturers, who must pay 25% tariffs on millions of cars built in Canada and Mexico with U.S.-made parts. That could help explain the double-digit rise in Toyota (TM) shares Wednesday. Tariffs are more of a problem for industrial stocks like automakers with low margins than for high-margin firms like semiconductors. The auto industry has a 3.6% margin, compared with 24.5% for the semiconductor industry profit margin.

• Alphabet shares climbed 3.4% ahead of the open. Alphabet's second quarter results of $2.31 per share for earnings and $96.43 billion in revenue easily beat the FactSet consensus of $2.18 and $93.96 billion. YouTube ad and Google Cloud revenue both topped analysts' forecasts. Alphabet also raised its capital expenditures projection to $85 billion from $75 billion. That could help semiconductor stocks, especially AI-related ones like Nvidia (NVDA), Broadcom (AVGO), and Advanced Micro Devices (AMD), all of which rose more than 1% this morning.
   
• Tesla plunged 6% after earnings and revenue met analysts' expectations of $0.40 per share and $22.5 billion, respectively. Vehicle deliveries fell 13% from a year earlier, no surprise since investors already knew about dropping deliveries. Investors seemed to grab onto CEO Elon Musk's comments during the earnings call when he said "we probably could have a few rough quarters" due partly to tariffs and the expiry of federal electric vehicle tax credits.
   
• IBM fell more than 6% despite beating consensus on revenue and earnings. The company also reaffirmed its fiscal year 2025 revenue growth outlook for at least 5% on a constant-currency basis. The important software revenues category rose 10% but just missed expectations in dollar terms.
   
• Chipotle shares lost some zip, falling 12% ahead of the open after the fast-food chain cut its forecast for sales at stores open a year or more. Revenue also just missed analysts' expectations.
   
• American Airlines (AAL) fell more than 5% in pre-market trading. Earnings beat expectations and revenue matched forecasts, but the company issued lower guidance for its third quarter. The company has slowed its capacity growth, and cited uncertainty among consumers.
   
• UnitedHealth Group (UNH) dropped nearly 4% as the company said it faces a Justice Department criminal and civil investigation related to its billing practices in the Medicare program.
   
• Dow shares dove 8.6% in pre-market trading as it reported quarterly losses that were worse than expected and cut its quarterly dividend in half. Third quarter guidance also missed expectations. Weakness in its packaging and specialty plastics segment hurt results and the firm cited a "tougher for longer" earnings environment amplified by trade uncertainties.
   
• Honeywell (HON) fell 2% ahead of the open despite beating analysts' earnings and revenue estimates. Guidance also topped consensus.
   
• Southwest Airlines (LUV) fell more than 3% in pre-market trading after missing earnings expectations.
• ServiceNow (NOW) climbed 7% ahead of the open as the software company exceeded consensus quarterly estimates and lifted guidance, citing AI-related strength.
   
• Las Vegas Sands (LVS) climbed 5% after a solid earnings report.
   
• Nuclear start-up Oklo (OKLO) and data center infrastructure provider Vertiv Holdings (VRT) each rose 1% this morning. Shares of both companies spiked yesterday as they announced a collaboration that they said will focus on advanced power and thermal management solutions for hyperscale and colocation data centers. This will be powered by steam and electricity from Oklo's nuclear power plants.
   
• Large industrial firms like Boeing (BA), Lockheed Martin (LMT), General Motors (GM), and Whirlpool (WHR) enjoyed solid gains yesterday after GE Vernova (GEV) reported strong earnings and guidance. GEV shares rose double digits yesterday and were up 0.8% early today. At the same time, recent strength in energy and health care—two sectors that were lackluster earlier this year—could indicate the continuation in 2025's pattern of sector swings.
   
• So far, 88% of S&P 500 companies reporting posted earnings per share above the consensus estimate, while 67% beat on revenue.
   
• Chances of a Fed rate cut next week were less than 3% early Thursday, according to the CME FedWatch Tool. Odds are 64% for at least one cut by September. President Trump plans to visit the Fed today, the first presidential visit there since President George W. Bush in 2006.

Copper futures (/HG—candlesticks) have now rallied nearly as much as gold over the last year, rising just under 40% versus about 41% for gold (/GC—purple line). Copper forged new all-time highs above $5.80 per pound, reflecting President Trump's planned 50% tariffs on imported copper set to begin August 1. The industrial metal is used in wiring for electronics, cars, computers, and other appliances. Copper traded flat for the year as recently as mid-April, but has soared since then. The U.S. trade deal with Japan has raised optimism around that huge economy, which might also raise copper demand and prices.

Check out the Investors' Calendar for a summary of the top economic events and earnings reports on tap this week.

July 24: ECB interest rate decision, June new home sales, and expected earnings from American Airlines (AAL), Dow (DOW), Honeywell (HON), Southwest Airlines (LUV), Union Pacific (UNP), Intel (INTC), and Newmont Mining (NEM).
July 25: June durable orders and expected earnings from Aon (AON) and HCA Healthcare (HCA).
July 28: Expected earnings from WM (WM), Nucor (NUE), and Whirlpool (WHR).
July 29: July consumer confidence and expected earnings from AstraZeneca (AZN), Stellantis (STLA), Boeing (BA), Booking (BKNG), Merck (MRK), PayPal (PYPL), Procter & Gamble (PG), Royal Caribbean (RCL), Spotify (SPOT), UnitedHealth (UNH), UPS (UPS), Starbucks (SBUX), and Visa (V).
July 31: June personal income, June personal spending, June PCE prices, and expected earnings from CVS Health (CVS), Biogen (BIIB), Apple (AAPL), Amazon (AMZN), Strategy (MSTR), Coinbase Global (COIN), Clorox (CLX), Roku (ROKU), and Lumen Technologies (LUMN).