Investing

3 Heavy Weight Stocks Dragging the Market Down Today

Gerelyn Terzo

Published: April 16, 2024 4:35 pm

With earnings season officially underway, the S&P 500 has been meandering between positive and negative territory throughout today’s trading session, most recently trading modestly lower. As of April 12, 6% of S&P 500 companies had reported Q1 earnings results, 83% of which had positive EPS surprises while over 50% had revenue upside, per FactSet.

The index is currently reporting earnings growth of 0.9% for the quarter, a pace that if maintained would produce the third consecutive quarter of year-over-year earnings growth. It’s still early in the quarter, and the market barometer is likely to exceed the current growth rate, with FactSet predicting 7% year-over-year earnings growth for the S&P.

A few of the sectors that are influencing the performance of the index today come from Big Tech, autos and bank earnings.

The 800-Pound Gorilla

At 7.01%, tech giant Apple (Nasdaq: AAPL) has the single-biggest weighting in the S&P 500, and it’s pressuring the index by over 2% today. Investors are responding to worries that the iPhone’s best days are behind the company, with its slice of the pie shrinking from 20.7% to 17.3% in Q1 after rival Samsung managed to achieve higher sales volume.

iPhone shipments plummeted by 10% in Q1, as smartphone makers continue to jockey for position. But Apple wasn’t the only company to experience sticker shock. Despite leading the rankings, Samsung experienced a year-over-year decline in shipments.

IDC predicts Apple and Samsung will keep their grip on the high-end market but they should stay on their toes because “the resurgence of Huawei in China, as well as notable gains from Xiaomi, Transsion, OPPO/OnePlus and vivo will likely have both [manufacturers] looking for areas to expand and diversify.”

One catalyst that Apple holds in its back pocket is artificial intelligence (AI), a technology the company seeks to harness for its mobile devices. JPMorgan has an optimistic long-term view, saying AI-powered iPhones will create an upgrade cycle not experienced since the onset of 5G. But the Wall Street firm doesn’t anticipate AI features will emerge on the iPhone until  next year and as a consequence lowered its price target on AAPL stock to $210.

Tesla Downsizing

With a 1.71% weighting in the S&P 500, Tesla (Nasdaq: TSLA) is also dragging the S&P 500 lower today. Tesla stock is down 3% on the day, extending a trend in which the stock can’t seem to find a bottom. The EV maker announced a round of job cuts in which approximately 10% of its workforce will be eliminated, spooking investors as the company seeks to cut costs in an increasingly competitive market environment.

Wedbush analyst Dan Ives says the layoffs were a “dark day” for Tesla but reiterated an “outperform” rating with a $300 price target attached, representing 92% upside potential. Ives believes Musk needs to regain the confidence of Wall Street. Tesla reports its Q1 results on April 23.

Bank of America Earnings Release

With less than a 1% weighting, Bank of America (NYSE: BAC) isn’t the biggest S&P 500 influencer. But with a 3% drop on the day to below $35 per share, it’s not helping, either. After Wall Street banks kicked off earnings season, Bank of America rounded out the group, failing to impress.

CFRA Director of Equity Research Ken Leon said the quarter wasn’t Bank of America’s finest hour, pointing to flat results across net interest income, deposits and loans, and credit card income.