US stocks tumble as momentum trades unwind, earnings disappoint

The S&P 500, Nasdaq 100, and Russell 2000 all ended Wednesday in the red.

Stocks slumped on Wednesday as the downturn in traders’ favorite speculative pockets of the market that started late last week began to infect the blue-chip stocks that have been big winners for major indexes.

Major indexes finished well off their lows, with the S&P 500 off 0.5%, the Nasdaq 100 about 1% lower, and the Russell 2000 underperforming with a drop of nearly 1.5%.

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Stocks that moved higher:

Intuitive Surgical soared after strong earnings reported after the bell on Tuesday sparked a wave of analyst upgrades.
Warner Bros. climbed amid reports it has rejected takeover offers around $24 per share but is still open to a sale.
Google rose after a report of a new deal with Anthropic for AI compute “valued in the high tens of billions.”

Stocks that moved lower

Beyond Meat had such a volatile day that trading was halted as traders finally hit the sell button on the latest meme stock. Earlier, it saw a premarket session with higher volume than any other stock in America.
Hot Wheels sales held up better than Barbie for Mattel, but the toymaker’s stock still fell after posting Q3 results that missed analysts’ estimates.
Carvana plunged as another subprime lender’s bankruptcy filing weighed on sentiment around the used car retailer and its exposure to subprime loans.
AST SpaceMobile dropped after announcing new share issuance and plans to raise more debt.
Quantum stocks including Rigetti and D-Wave Quantum plunged as retail traders hit the sell button.
Nuclear stocks suffered the same fate, as Oklo, Nano Nuclear, and Centrus Energy took a beating amid a broad unwind of momentum trades.

Southwest Airlines At Ronald Reagan Washington National Airport

Southwest’s first full quarter charging for checked bags drives it to record Q3 revenue

Southwest became the third major airline to report its third-quarter earnings when it dropped its results after the bell Wednesday.

Max Knoblauch2h

IBM slides despite earnings beat

Here’s how Big Blue did.

Matt Phillips2h

J. Edward Moreno2h

Moderna drops after reporting trial for birth defect vaccine failed

Moderna dropped in after-hours trading Wednesday after it reported that its experimental vaccine for cytomegalovirus (CMV), which can cause birth defects, failed in a late-stage trial.

The company is perhaps best known for being tapped by the government to quickly develop a vaccine for COVID-19 in 2020, which remains its single source of revenue. Investors have been eager for signs that it will add more vaccines to its portfolio soon.

The CMV vaccine was the main product in Moderna’s pipeline prior to the COVID-19 pandemic. In the most recent results, the vaccine was only between 6% and 23% effective in blocking infection, which was “well below” the company’s target of at least 49%, the company said in a statement.

In statements announcing the results, Moderna’s leaders described the results at “disappointing.” The company fell more than 5% after-hours and is down more than 35% this year.

Max Knoblauch5h

Carvana plunges as investors respond to another subprime lender’s bankruptcy filing

Used car retailer Carvana is plunging on Wednesday, with the stock on pace for its worst day since auto tariffs took effect in April.

Likely spooking investors is a fresh bankruptcy filing by PrimaLend, which specializes in financing for dealerships focused on subprime borrowers (customers with lower credit scores, typically below 600, as defined by Experian). The news follows last month’s bankruptcy filing by another subprime auto lender, Tricolor Holdings.

Carvana doesn’t appear to work directly with PrimaLend, but it does likely have significant exposure to subprime loans. According to a January report by Hindenburg Research, which was shorting Carvana, 44% of the loans Carvana packages into asset-backed securities (ABS) are classified as nonprime (601-660 credit scores). More than 80% of its recent nonprime ABS deals had average FICO scores in the “deep subprime” range, or the riskiest levels, according to the report. Carvana at the time called the report “intentionally misleading and inaccurate.”

Carvana has massive growth goals, saying earlier this year that it aims to sell 3 million retail units per year within 5 to 10 years. (Wall Street expects it to sell about 580,000 units this year.) Lower-income buyers could be a significant part of that growth.

Following Tricolor’s implosion last month, JPMorgan CEO Jamie Dimon said: “When you see one cockroach, there are probably more. Everyone should be forewarned on this one.” With investors pouring out of Carvana on Tuesday, it seems Wall Street isn’t taking that warning lightly.

There is likely also some momentum pullback baked into Carvana’s drop: the stock, which has been a favorite among retail traders, is still up 58% this year, even after Wednesday’s drop.

Luke Kawa7h

Beyond Meat halted for downside volatility after daily gain of more than 100% disappears

When the broad market turned shortly after 10 a.m. ET, the meme stocks were not immune from the carnage for long.

Beyond Meat, which was up 112% at its peak during regular trading hours on Wednesday amid another day of insanely high volumes and call activity, was halted for downside volatility after briefly erasing all of those gains.

As of 11:49 a.m. ET, the retail trader who posted their “YOLO” buy of 10,000 shares at a price of $7.50 on r/WallStreetBets is now down more than 40% (or $30,000) on the day.