Caterpillar fell about 9% on Thursday, its worst single-day drop since March 2020.
The funny thing is, revenue and profit actually beat expectations. The market is focused on the slight weakness in its construction business and whether incoming orders can keep up.
That’s earnings season for you: good numbers aren’t enough—a slightly weaker outlook and the stock gets hammered. Industrial stocks are often seen as an economic barometer. Its drop is a separate story from the Nasdaq being dragged down by tech, but sentiment can spill over between the two.
Big Tech is scrutinizing AI spending, while traditional cyclical companies are scrutinizing real-world demand. When both sides wobble at once, the indexes look even worse.
I don’t chase a rebound on the day of a plunge like this. First, I want to see whether it’s an isolated case or whether infrastructure and equipment stocks are cooling off together. If it’s just overly aggressive expectation management, there could be a recovery later. If orders have reached an inflection point, this won’t be over in a day.
Don’t just keep an eye on the Magnificent Seven. Sometimes, the pulse of the market is reflected in old-line names like Caterpillar.
The above content is for informational purposes only and does not constitute investment advice.
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