Stocks ended little changed in Wednesday’s choppy trading, as investors braced for earnings releases from some of the market leaders. The S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq-100 (NDX) closed a third winning day in a row, underpinned by better-than-expected earnings, while the Dow Jones Industrial Average (DJIA) reversed its previous course, notching a small decline.
Earnings and Guidance Moving Markets
The DJIA was brought down on the day by a fall in industrials, pushed down by Moody’s downgrade of Boeing (BA) to a level just a notch away from “Junk” status. In addition, airline stocks were hit by the Biden Administration’s newly minted rules aimed at eliminating hidden fees and requiring airlines to give cash refunds for delays.
Meanwhile, semiconductor stocks received a boost from Texas Instruments (TXN), which climbed on better-than-expected quarterly results and forecasts for a strong revenue increase in Q2 amid demand recovery.
So far, 25% of the S&P 500 firms have reported their first-quarter results, with 80% of them beating earnings forecasts. However, in the current nervous market environment, stocks are rewarded less than usual for beating estimates, while those that miss elicit a far worse reaction. Moreover, investors are placing an exceptionally strong focus on guidance as they try to establish whether stocks have more room to run amid overstretched valuations, higher-for-longer interest rates, and geopolitical risks.
Megacaps on the Forefront
Tesla (TSLA) opened the Magnificent 7 earnings season with the stock surging over 12% despite a miss on top- and bottom-lines in the past quarter. However, investor’s cheered the EV maker’s plans to begin producing additional models, including more affordable ones, as early as next year.
Meta Platforms (META) fell in extended hours trading despite strongly beating earnings estimates in Q1, as the tech giant revealed it expects much higher-than-anticipated capital spending this year. After a failed attempt at Metaverse, the Facebook parent is spending billions to catch up with its peers in the area of artificial intelligence (AI).
Markets are eyeing further megacap earnings, with Microsoft (MSFT) and Alphabet (GOOGL) scheduled to report their results later today.
Macro in Focus
Meanwhile, investors are also focusing on the important economic reports due this week. The preliminary Q1 2024 GDP will be published today, and the all-important Core PCE – the Fed’s preferred inflation measure – will be posted on Friday. The previous months’ data pushed back expectations for the start of the central bank’s monetary easing, and investors will therefore be closely watching these and other reports for further clues.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
