4:05pm: Stocks slide into negative territory
US stocks were in the red for a second straight day after a steady stream of earnings contrasted against a backdrop of elevated inflation and further Fed policy tightening.
The S&P 500 closed lower at 4,394 points for a loss of 1.5%, and the Dow slid down 1.1% to 34,793 points. Meanwhile, the Nasdaq lost the most percentage-wise at 2.1% to finish at 13,175.
1pm: US stocks in red
US stocks fell in afternoon trading as investors continued to monitor a steady stream of corporate earnings results against a backdrop of US Federal Reserve policy tightening.
The Dow Jones Industrial Average dipped into the red, while the Nasdaq Composite Index fell 0.8%, weighed down by a slide in shares of Netflix. The S&P 500 also fell 0.4%.
So far, about 80% of the S&P 500 companies that have posted results have beaten analysts’ expectations, according to FactSet.
However, fund managers are bracing for the Fed to push rates up at a rapid clip this year to quell inflation running at its highest pace in decades. The shift is hurting government bonds and the markets that benefited from years of easy monetary policy.
9.55am: US shares start the day higher
US indices started in the green on Thursday, with the Nasdaq also recovering from weakness after shares of Netflix toppled following disappointing first-quarter subscriber numbers.
In New York, the Dow Jones Industrial Average gained 290 points, or 0.83%, in early trade to 35,451, while the broader S&P 500 added 51 points, or 1.15%, to 4,510.
The tech-laden Nasdaq rose 254 points, or 1.89%, to stand at 14,707.
After Wednesday's close, Tesla Inc (NASDAQ:TSLA) reported another record quarter, sending its shares more than 11% higher. United Airlines Holdings Inc.'s shares also rose more than 11% after it forecast a profit for 2022 as the airline industry normalizes following coronavirus (COVID-19).
“With the earnings season in full swing and in full focus, investors are reacting to the differing fortunes of companies battling inflationary pressures and a changing interest rate environment," commented Richard Hunter, head of markets at interactive investor. "Meanwhile the intentions of the Federal Reserve also remain core to investors’ current caution. The “Beige Book” summary of recent economic conditions pointed to a moderately recovering economy, despite the pressures of high inflation and labour shortages in many sectors."
6.30am: US stocks set to open higher
US stocks are expected to open slightly higher on Thursday ahead of further earnings releases from corporate America, though the mood will remain cautious as investors brace for further market volatility, exacerbated by Russia's testing of a new nuclear-capable intercontinental ballistic missile.
Analysts said investors will also be keeping a close watch on comments from Federal Reserve Chairman Jerome Powell, who is scheduled to appear at a debate on the global economy hosted by the International Monetary Fund, alongside European Central Bank President Christine Lagarde and the IMF’s managing director Kristalina Georgieva at 1.00pm ET.
Futures for the Dow Jones Industrial Average gained 0.58% in Thursday’s pre-market trading, while those for the broader S&P 500 index were up 0.73%. Contracts for the tech-heavy Nasdaq 100 added 1.03%, rebounding from losses triggered by Netflix’s tumble yesterday.
In after-hours trading on Wednesday, shares of Tesla Inc (NASDAQ:TSLA) rose 5% after it shrugged aside supply chain issues and pandemic restrictions to report a seven-fold jump in net profit of US$3.3 billion in the first quarter and set a higher production target for the year.
On the contrary, shares of the world’s largest streaming company Netflix Inc (NASDAQ:NFLX) lost over 35% on Wednesday after its subscriber numbers slumped unexpectedly in the first quarter.
Since the release of disappointing results from big banks, investors have been anxious to see which companies have been able to weather rampant inflation and if American households can continue to balance their budgets against soaring prices, analysts said.
“Even though the sell-off of 35% (in Netflix shares) seems gigantic, we have already witnessed a 20%-30% fall or jump after the big tech results,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “The size of the reaction hints at how prices are (inflated) due to cheap liquidity and easy financial conditions of the pandemic months and the potential losses for other tech companies on the back of soft earnings announcements in the weeks to come.
With the Federal Reserve expected to act relatively swiftly to tame inflation, the outlook for tech companies will remain unfavourable, she added.
Ozkardeskaya said while there has not been any major switching of funds from tech to safe-haven stocks, companies that are unable to pass on the cost of higher prices to customers are likely to suffer more than those that can.
Additionally, “escalating tensions (in the Russian-Ukraine conflict) could hit sentiment after Russia test-fired a new intercontinental missile that could carry multiple nuclear warheads,” she noted.
Elsewhere, oil prices were a little higher, reflecting supply-side concerns as Russia’s oil production show signs of falling. Benchmark Brent crude futures were up 1.01% at $107.88 a barrel, while WTI was 0.71% higher at $102.92 a barrel.
Contact the author at jon.hopkins@proactiveinvestors.com