U.S. equities are under serious pressure on Wednesday, with the Dow Jones Industrial Average threatening to test its 20-day moving average for the first time since September. The catalyst for the decline was reports that Republicans in Congress could be looking at cutting 401(k) contribution limits as part of efforts to limit the revenue drag from tax cut efforts.
Also dragging are weak earnings reports from Boeing Co (NYSE:BA) and AT&T Inc. (NYSE:T), as well as ongoing selling pressure against the mega-cap “FANG” tech stocks. The CBOE Volatility Index (VIX) is responding, rising 15% to test levels not seen in more than a month.
With sentiment and investor positioning so red hot, some give-back was expected. But the question now is how much of the 17% rally since February is vulnerable to profit taking — especially with President Trump mulling a new pick for Federal Reserve chairman, one that could mark a hawkish turn for the institution that Wall Street has grown so dependent upon.
As the carnage unfolds, here are five large-cap stocks suffering major breakdowns:
Large-Cap Stocks Breaking Down: Tesla (TSLA)
Tesla Inc (NASDAQ:TSLA) shares are running off the road, dropping out of a multimonth consolidation range to fall towards their 200-day moving average for the first time since January. This risks a reversal of a nearly 50% gain as doubts grow about the company’s overzealous production estimates for its Model 3 sedan.
The selloff comes in the wake of reports the company received permission to build a factory in Shanghai, a rare example of an American manufacturer not being forced to pair with a local Chinese company.
The company will next report results on Nov. 1 after the close. Analysts are looking for a loss of $2.27 per share on revenues of $2.95 billion. When the company last reported on Aug. 2, a loss of $1.33 per share beat estimates by 59 cents on a 119.6% rise in revenues.
Large-Cap Stocks Breaking Down: Procter & Gamble (PG)
Procter & Gamble Co (NYSE:PG) shares are dropping hard and fast — in sympathy with the rest of the consumer staples space battered by headwinds including pressure from Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores Inc (NYSE:WMT) and the rise of upmarket store brands. The drop returns shares to levels last seen in July.
The company will next report results on Jan. 19 before the bell. Analysts are looking for earnings of $1.14 per share on revenues of $17.35 billion. When the company last reported on Oct. 20, earnings of $1.09 beat estimates by a penny on a 0.8% rise in revenues.
Large-Cap Stocks Breaking Down: General Electric (GE)
General Electric Company (NYSE:GE) shares are dropping all the way back to levels not seen since the summer of 2015, down roughly 30% from the highs seen earlier in the year. Shares have been battered by weak results, management turnover, and analyst downgrades. Oppenheimer cut the stock to “sell” on Tuesday. And Stifel cut to “hold” in anticipation of a dividend cut.
The company will next report results on Jan. 19 before the bell. Analysts are looking for earnings of 28 cents per share on revenues of $34.12 billion. When the company last reported on Oct. 20, earnings of 29 cents per share missed estimates by 20 cents despite an 11.5% rise in revenues.
Large-Cap Stocks Breaking Down: AT&T (T)
AT&T Inc. (NYSE:T) shares are in freefall Wednesday, down nearly 4% to drop out of a multimonth trading range after reporting weaker-than-expected earnings of 74 cents per share on a 3% drop in revenue.
The wireless telecom space is getting increasingly competitive amid network quality equalization leading to aggressive price cuts and the return of unlimited data plans. The rollout of the new iPhone X is only magnifying these trends.
The company will next report results on Jan. 23 after the close. Expectations are currently for 67 cents on $41.4 billion in revenue.
Large-Cap Stocks Breaking Down: Pepsico (PEP)
PepsiCo, Inc. (NYSE:PEP) shares have reversed back below their 200-day moving average, testing their early October low. Shares rallied nearly 20% off of their February low into the high set in the middle of August. But investors and analysts are worried the company is losing its fizz amid a slowdown in its beverage segment as consumers move away from sugary sodas.
The company will next report results on Feb. 15 before the bell. Analysts are looking for earnings of $1.30 per share on revenues of $19.4 billion. When the company last reported on Oct. 4, earnings of $1.48 beat estimates by four cents on a 1.3% rise in revenues.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
