Dow Jones: Tesla, Lower Yields Lift Stocks but Weekly Losses Loom

Stocks Climb Despite Weekly Decline for S&P 500

U.S. stocks rose Friday as the S&P 500 and Nasdaq Composite recouped some losses from earlier in the week, thanks to a surge in Tesla shares following strong earnings. However, all three major indexes remain on track to break their six-week winning streaks, as high Treasury yields and mixed earnings reports weigh on sentiment.

Despite Friday’s rally, the Dow Jones Industrial Average remains down over 2% this week, while the S&P 500 and Nasdaq have lost 0.9% and 0.4%, respectively.

Tesla Rally Boosts Nasdaq and S&P 500

Tesla shares surged over 10% after the electric vehicle maker reported better-than-expected earnings, propelling both the Nasdaq and S&P 500. CEO Elon Musk’s optimistic forecast for vehicle production in the coming year fueled confidence among investors in Tesla and the broader EV sector. This rally offered rare positive momentum during a volatile week, with Tesla posting its best single-day performance in over a decade, providing a lift to the technology-focused Nasdaq.

Lower Yields Support Gains

A decline in Treasury yields has also been a supportive factor in Friday’s rally. The 10-year Treasury yield, which had hit three-month highs earlier in the week by exceeding 4.25%, saw a slight pullback, easing pressure on growth stocks.

Megan Horneman, Chief Investment Officer at Verdence, noted that the S&P 500 and Nasdaq typically benefit from lower yields, as higher rates generally weigh on valuation-sensitive tech and growth stocks.

Analyst Downgrades Weigh on Sentiment

Multiple downgrades from analysts further pressured sentiment. Citi downgraded Bristol-Myers Squibb from buy to hold, citing potential volatility in the near term from new product launches. While Citi remains positive on Bristol-Myers’ growth prospects long term, analyst Geoff Meacham expects a challenging transition period, with limited gains in share price until around 2027.

Jefferies also downgraded Boston Beer, citing weaker-than-expected demand for its Truly hard seltzer brand, which has seen declines accelerate recently. Twisted Tea, a key growth driver, is also slowing. Analyst Kaumil Gajrawala noted the company’s growth avenues are limited for now, prompting Jefferies to adopt a more cautious outlook.

Apple Downgraded on iPhone Demand Risks

Apple shares slipped nearly 1% premarket following a downgrade by KeyBanc to underweight. Analyst Brandon Nispel highlighted concerns that the iPhone SE model could cannibalize demand for the flagship iPhone 16, which might put pressure on Apple’s average sales price and growth in the near term.

Market Forecast

Despite Friday’s gains, market sentiment remains cautious as high yields and earnings season volatility persist. Should yields stabilize, the S&P 500 and Nasdaq may see short-term bullish momentum. However, investors should remain attentive to Treasury yield trends and forthcoming earnings results, which could sway market direction in the weeks ahead.