Stocks tumble as record-setting rally cools

June 14, 2024

5 minutes read

US stocks pulled back on Friday, signaling a retreat from all-time highs as European turmoil rattled nerves and Elon Musk’s pay package win thrust Tesla (TSLA) center stage.

The Dow Jones Industrial Average (^DJI) sank about 0.3% to lead the declines, while the S&P 500 (^GSPC) shed 0.2%. The tech-heavy Nasdaq Composite (^IXIC) dropped about 0.1%.

Stocks are losing steam after the benchmark S&P 500 and the Nasdaq nailed record closes for the fourth day in a row, boosted by strength in techs. Both indexes are still on track for weekly gains.

A surprise cooling in wholesale price pressures gave heart to investors betting on two interest rate cuts this year since the decline is likely to be reflected in the coming PCE inflation reading watched by the Federal Reserve.

But the Fed this week dialed down its projected rate cuts from three to one in 2024, keeping the market guessing and leaving stocks vulnerable to shifts in mood. Strength in technology names has driven broader gains, setting up the S&P 500 and the Nasdaq for weekly wins. But the Dow faces a loss for the week as questions persist about the breadth of this year’s rally.

Meanwhile, Tesla shares were down nearly 2% Friday after shareholders reapproved CEO Elon Musk’s pay package. Despite opposition from some large investors, 77% of votes were cast in favor, the EV maker said.

Weighing down spirits was a slump in European stocks (^STOXX), which were headed for their worst week since October. Investors are concerned about the fallout for markets if the far right makes political gains or even wins France’s snap election.

In individual movers, Adobe (ADBE) shares jumped roughly 15% after an upbeat AI sales projection from the Photoshop maker.

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Fri, June 14, 2024 at 4:45 PM GMT+1

Trump offers a low-tax pitch to business leaders

The Trump campaign engaged in fresh outreach to the business world that crystallized his promises to corporate America should he win the election.

Donald Trump met with prominent CEOs in the nation’s capital, speaking to a group supremely focused on tax reform, reports Yahoo Finance’s Ben Werschkul.

The former president was interviewed on stage by Larry Kudlow, his former top economic adviser, and appeared before an audience that included figures like Jamie Dimon of JPMorgan Chase (JPM), Tim Cook of Apple (AAPL), Bechtel CEO Brendan Bechtel, and Walmart (WMT) CEO Doug McMillon and dozens more top executives.

According to one CEO who was in attendance, Trump was focused on favorably comparing his own record on issues like taxes, regulation, and inflation to Biden’s time in office. Trump also offered attacks on Biden, but the CEO was skeptical that the back-and-forth moved the needle on business leaders’ overall views.

The plan Trump has outlined centers on an extension of his 2017 tax cuts, which cut costs for many individuals and businesses. He is promising to extend those cuts and also potentially make new ones, including an idea to further lower the corporate tax rate.
Fri, June 14, 2024 at 4:23 PM GMT+1

Musk doubles down on Tesla growth after successful shareholder vote

Tesla CEO Elon Musk, fresh off a major win in which shareholder’s reapproved his record-breaking pay package, is doubling down on the company’s enormous potential for growth.

After Tesla confirmed that 72% of votes cast by shareholders were in favor of a $56 billion compensation package, Musk reiterated his vision for Tesla that goes beyond cars.

Musk predicts that Tesla’s humanoid robot prototype, called Optimus, will surpass the size of the company’s vehicles business.

“If the price-to-earnings multiple is, say, I don’t know, 20 or 25, something like that, that would mean a $20 trillion market cap from Optimus alone,” Musk said at the company’s annual shareholder meeting.

But Musk’s optimism for the future of Tesla faces multiple hurdles. For one, even after the majority of voting shareholder’s backed his pay package, other stakeholders could challenge its legality before the same Delaware court that voided Musk’s pay earlier this year.

In addition, Musk has previously threatened to develop AI technology outside of Tesla if he is not given sufficient voting control over company decisions.
Fri, June 14, 2024 at 3:20 PM GMT+1

Stocks trending in morning trading

Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.

Adobe (ADBE): Shares of the software company surged 15% after reporting fiscal second quarter earnings that beat expectations and boosted guidance for the year. A rosier outlook for sales of its creative products suggests increasing adoption of the company’s new AI tools.

GameStop (GME): The meme stock rose almost 3% Friday morning, riding the momentum from the earlier session after Keith Gill, the folk-hero retail trader, shared a screenshot of an account that showed a massive increase in his GameStop position. The image appeared to show more than 9 million GameStop shares, up from Monday’s 5 million shares from a similar screenshot that the account posted on Reddit.

Shopify (SHOP): Shares of the e-commerce company gained 3% following an analyst upgrade that implied a 16% increase in the stock price. Evercore ISI analyst Mark Mahaney upgraded Shopify from In-Line to Outperform after the stock’s pullback created an entry point for investors.

Zscaler (ZS): The cloud security company increased nearly 2% following an upgrade from JPMorgan. Analysts said Zscaler is a “next generation” security company that is poised for growth, which is currently trading at a discount. JPMorgan upgraded the stock from Neutral to Overweight.
Fri, June 14, 2024 at 3:09 PM GMT+1

RH stock plunges after retailer posts wider-than-expected loss

RH (RH) stock sank more than 17% Friday morning after the luxury home goods retailer reported a wider-than-expected loss the previous day and said it expected business conditions to remain challenging until interest rates ease and the housing market rebounds.

RH posted a loss of $0.40 per share, wider than analyst estimates for a loss of $0.09.

“I don’t think there’s going to be a sustained inflection in luxury home sales at these interest rates,” RH chairman and CEO Gary Friedman told investors and analysts on the company’s earnings call on Thursday, noting that mortgage rates may not meaningfully move downward until next year.

“Home prices went up 42% in the two years of COVID, and then they’ve continued to compound the last two years. … And now you’ve got interest rates 7% or higher when they were 2.6% to 3.3%. I mean it’s just simple affordability now,” the executive added.

The comments come after the Federal Reserve held interest rates steady this week and signaled it expects just one interest rate cut this year, down from three previously. The Fed doesn’t directly set mortgage rates, but its policy moves impact them.

The average weekly rate on the 30-year fixed mortgage slightly declined to 6.95% from 6.99% the prior week, per Freddie Mac data.

Read more: Mortgage rates hover around 7% — is this a good time to buy a house?
Fri, June 14, 2024 at 2:34 PM GMT+1

Stocks tick lower as European markets recoil

US stocks pulled back from all-time highs as investors reacted to jitters in Europe, where the coming snap election in France could bring advancements for the nation’s far-right party.

The Dow Jones Industrial Average (^DJI) sank about 0.5%, while the S&P 500 (^GSPC) shed 0.3%. The tech-heavy Nasdaq Composite (^IXIC) dropped 0.2%.