4:09pm: Reporting tech giants may be overvalued, analyst says
The Dow closed Tuesday up 205 points, 0.6%, at 33,141, the Nasdaq Composite added 122 points, 0.9%, to 13,140 and the S&P 500 gained 31 points, 0.7%, to 4,248. The Small-cap Russell 2000 index improved 14 points, 0.8%, to 1,679.
The Dow managed to snap a four-session losing streak ahead of Big Tech earnings reports from Alphabet and Microsoft. However, the valuation of those companies is already too high, according to Bahnsen Group chief investment officer David Bahnsen.
“No matter what results we see from big tech earnings this week, the results won’t justify their outlandish valuations,” Bahnsen said. “Even with the declines in big tech stock prices over the past three months, big tech stocks are still too expensive and are priced for perfection and then some, and that’s a dynamic that is not likely to end well.”
Meanwhile, Coke shares gained nearly 3% after its earnings, while Spotify stock added more than 10%.
12:00pm: US private sector grows modestly
US stocks remained in rude health boosted by upbeat earnings and an improvement in business activity in October.
At midday, the Dow Jones Industrial Average was up 189.27 points, 0.6%, at 33,125.68, the S&P 500 was up 25.51 points, 0.6%, at 4,242.55 and the Nasdaq Composite was up 96.88 points, 0.7%, at 13,115.21.
The US private sector saw moderate expansion in October, following largely stagnant output in September and August, according to the latest flash estimate from S&P Global on Tuesday.
The headline S&P Global US purchasing managers' index rose to 51.0 in October, from 50.2 in September.
Rising above the 50.0 no-change mark, it signaled a modest uptick in business activity in the month.
S&P Global said the upturn was supported by expansions in activity for manufacturers and service providers alike. It noted that demand conditions for manufacturers improved for the first time since April, while service providers witnessed a slower drop in new orders.
Still to come earnings from Alphabet and Microsoft after the closing bell.
9:40am: Earnings drive US stocks higher
US stocks opened higher as investors digested a hefty batch of upbeat earnings and looked ahead to figures from Alphabet and Microsoft after the market close.
Shortly after the opening bell, the Dow Jones Industrial Average was up 288.67 points, 0.9%, at 33,225.08, the S&P 500 up 31.22 points, 0.7%, at 4,248.26 and the Nasdaq Composite was 94.01 points, 0.7%, at 13,112.34.
General Electric (NYSE:GE) rose 3.6% after raising its 2023 outlook for profit and cash flow as it prepares to complete its three-way demerger in the first half of next year.
The conglomerate said revenue in the three months to September 30 soared 20% to $17.35 billion from $14.47 billion the year before.
GE has already spun off its healthcare arm, establishing New York-listed GE HealthCare Technologies Inc, and intends to split its two remaining units, GE Aerospace and energy business GE Vernova, in the second quarter of next year.
The Coca-Cola Company (NYSE:KO) raised its revenue and earnings outlook after rising prices drove a strong third quarter, sending shares 3.3% higher.
The Atlanta, Georgia-based soft drinks maker said net revenue in the quarter ended September grew 8% to $12.0 billion, and organic revenue grew 11%.
Revenue performance included 9% growth in price/mix and 2% growth in concentrate sales, the firm said.
Elsewhere, results saw gains for 3M, up 5.1%, RTX, up 5.8%, Verizon, up 7.0%, and Spotify, up 5.0%.
But General Motors fell 0.1% after the Detroit carmaker withdrew guidance due to the uncertainty caused by the car workers strike.
GM said strike action had so far cost it $800 million in earnings before interest and taxes, with another $200 million lost each week as the walkout drags on.
7:00am: US stocks called higher ahead of Big Tech earnings
US stocks futures rose across the board as investors look ahead to results from two of the Magnificent Seven, Alphabet and Microsoft, after the market close.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 were up 0.4%, and contracts for the Nasdaq 100 futures rose 0.5%.
Peter Garnry head of equity strategy at Saxo thinks Microsoft and Alphabet earnings “are crucial for equity sentiment as the US technology sector has seen 12-month forward earnings expectations rising significantly more than the S&P 500 Index this year raising the stakes.”
Ahead of that, the market will be digesting a slew of earnings from the likes of Coca-Cola, Verizon, General Electric (NYSE:GE), RTX, 3M, General Motors, Kimberly-Clark, and Halliburton.
Spotify was quick out of the blocks with its numbers swinging to a profit in the latest quarter as a cost-cutting drive paid off and its recent price hike did not dissuade sign-ups.
The music streaming service reported net income of €65 million on €3.4 billion in revenue in the three months to September 30.
Operating expenses were down 13% from the same period a year ago, when Spotify lost €166 million.
“We are encouraged by the early results we have seen from select efficiency initiatives”, Spotify said in a statement.