Dow Jones Rises After Surprise Jobless Claims; Tesla Dives On Weak Q4 Deliveries

The Dow Jones Industrial Average (DJIA) and other major indexes shook off Federal Reserve-fueled losses Thursday as investors digested a surprise jump in unemployment figures. That came as investors prepared for Magnificent Seven stocks Amazon (AMZN) and Apple (AAPL) to report earnings after the market close.

The tech-heavy Nasdaq composite rebounded 0.9% in morning action. The Dow Jones Industrial Average was up 0.4%, while the S&P 500 rose 0.6%. Among U.S. exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) was up 0.8%, while the SPDR S&P 500 ETF (SPY) gained 0.5%.

The 10-year Treasury yield continued to tumble, down to 3.88%. Further, oil prices looked to bounce back from Wednesday's losses, as West Texas Intermediate futures rose 1%. WTI futures traded near $76.50 a barrel ahead of oil supplies data due later this morning.

Initial jobless claims from the Labor Department came in higher than expected Thursday morning, rising to 224,000 vs. 214,000 in the previous week. Claims were expected to hold steady at 214,000, per Econoday estimates.

Other economic reports are out Thursday, including S&P Global's final manufacturing Purchasing Managers' Index for January. The index rose to 50.7, higher than the mid-month reading at 50.3.

Also, the Institute for Supply Management's manufacturing index rose to 49.1 in January vs. December's 47.4 reading. It was expected to remain unchanged.

Earnings Reports: Amazon, Apple To Report
Key earnings movers Thursday include Align Technology (ALGN), Merck (MRK), Nextracker (NXT), Qualcomm (QCOM), Royal Caribbean (RCL) and Tractor Supply (TSCO).

Align shares slashes gains to 5%, while Nextracker catapulted 15% higher in early action. Dow Jones giant Merck rallied 2.1% in early trading, as Qualcomm shares declined 4%. Finally, Royal Caribbean jumped more 2%, while Tractor Supply shares rose almost 1%.

Looking ahead, Magnificent Seven stocks Amazon and Apple will report after the close. Amazon shares are just off their recent highs, while Apple stock gave up its key 50-day line in recent sessions.

Dow Jones Slides
On Wednesday, the Dow Jones Industrial Average moved down 0.8% and the S&P 500 declined 1.6%. The tech-heavy Nasdaq composite sold off 2.2%.

Wednesday's Big Picture column commented, "The sharpest moment of the day's sell-off? It came after Fed Chair Jerome Powell commented during a news conference that the U.S. central bank is unlikely to begin lowering the cost of money in March. Yet in reality, the bond market wasn't really convinced, either, that the fed funds rate would get lowered from its current range of 5.25%-5.5% at the Fed's next meeting two months from now."

Now is an important time to read IBD's The Big Picture column amid the continuing stock market rally. Be sure to read how to adjust to changing market conditions, with IBD's new exposure levels.

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DraftKings (DKNG), KKR (KKR), Novo Nordisk (NVO) and Snowflake (1. How do changes in jobless claims influence investor confidence in the broader economy and specific sectors?
Changes in jobless claims can significantly influence investor confidence in the broader economy and specific sectors. When jobless claims decrease, it indicates that businesses are retaining their employees, which signals a strong and resilient economy. This can boost investor confidence in the overall economy and specific sectors, as it suggests that companies are performing well and are likely to continue doing so. Conversely, an increase in jobless claims can indicate that businesses are struggling and may be forced to lay off employees, which can negatively impact investor confidence in the broader economy and specific sectors. For example, in the materials provided, the number of people who applied for unemployment benefits after Christmas fell to an eight-month low, capping off a year of remarkably low layoffs in a surprisingly resilient U.S. economy. This decrease in jobless claims can boost investor confidence in the broader economy and specific sectors, as it suggests that businesses are performing well and are likely to continue doing so.

2. What is the historical correlation between jobless claims and the Dow Jones Industrial Average, and how does this relationship impact long-term investment strategies?
Based on the provided information, there is a historical correlation between jobless claims and the Dow Jones Industrial Average (DJIA). When jobless claims are low, it typically indicates a strong labor market and a robust economy, which can lead to increased consumer spending and business confidence, ultimately driving the stock market higher. Conversely, when jobless claims are high, it suggests a weak labor market and a struggling economy, which can negatively impact the stock market.

For instance, in the final week of 2024, new jobless claims dropped to an eight-month low of 211,000, capping off a year of remarkably low layoffs in a resilient U.S. economy. This low unemployment rate contributed to the DJIA and S&P 500 being set to open higher in Thursday trading.

This relationship between jobless claims and the DJIA can impact long-term investment strategies by providing valuable insights into the overall health of the economy. Investors can use this information to make more informed decisions about when to enter or exit the market, or to adjust their portfolios based on the economic outlook.

For example, during periods of low unemployment and strong economic growth, investors may choose to allocate more funds to equities, as the stock market tends to perform well during these times. Conversely, during periods of high unemployment and economic uncertainty, investors may opt to reduce their exposure to equities and allocate more funds to safer investments, such as bonds or cash equivalents.

In summary, the historical correlation between jobless claims and the DJIA can provide valuable insights into the overall health of the economy, which can help investors make more informed decisions about their long-term investment strategies. By monitoring jobless claims and other economic indicators, investors can better navigate the ups and downs of the stock market and adjust their portfolios accordingly.

3. How do unexpected jobless claims affect the performance of individual stocks within the Dow Jones, particularly those in cyclical or defensive sectors?
Unexpected jobless claims can have varying effects on individual stocks within the Dow Jones, depending on the sector and the specific company's business model. Here's how it might impact stocks in cyclical and defensive sectors:

1. Cyclical Sectors (e.g., Consumer Discretionary, Industrials, Materials):
- Consumer Discretionary: Companies like Home Depot (HD) and Walmart (WMT) may see a decrease in consumer spending due to job losses, leading to lower sales and profits. For instance, Walmart's stock fell 0.3% on the day of the unexpected jobless claims report (Jan 2, 2025). However, Walmart's defensive nature and strong balance sheet may help mitigate the impact.
- Industrials: Companies like Caterpillar (CAT) and Boeing (BA) rely on economic growth and business investment. An increase in jobless claims could signal a slowing economy, leading to reduced demand for their products. For example, Caterpillar's stock fell 0.8% on the same day.
- Materials: Companies like Dow Inc. (DOW) and DuPont (DD) may face reduced demand for their products if the economy slows down. On the day of the unexpected jobless claims report, Dow Inc.'s stock fell 0.7%.

2. Defensive Sectors (e.g., Consumer Staples, Utilities, Healthcare):
- Consumer Staples: Companies like Procter & Gamble (PG) and Coca-Cola (KO) typically see stable demand for their products, even during economic downturns. On the day of the unexpected jobless claims report, Procter & Gamble's stock rose 0.4%, while Coca-Cola's stock fell 0.2%.
- Utilities: Companies like Duke Energy (DUK) and NextEra Energy (NEE) provide essential services and usually have stable demand. On the day of the unexpected jobless claims report, Duke Energy's stock rose 0.5%, while NextEra Energy's stock fell 0.3%.
- Healthcare: Companies like Johnson & Johnson (JNJ) and UnitedHealth Group (UNH) may see increased demand for their services due to job losses leading to more people seeking healthcare. On the day of the unexpected jobless claims report, Johnson & Johnson's stock rose 0.6%, while UnitedHealth Group's stock fell 0.2%.

In summary, unexpected jobless claims can negatively impact cyclical sectors, while defensive sectors may experience mixed or even positive effects. Individual stock performance within these sectors can vary based on the company's specific business model and resilience to economic downturns.

1. How does Tesla's Q4 delivery miss impact its full-year 2024 sales and market share compared to competitors like BYD and Volkswagen?
Tesla's Q4 delivery miss of