4.10pm: US markets storm ahead once again
US markets forged ahead once more driven by falling Treasury yields and hopes that the aggressive rate rising stance of the Federal Reserve might soften in light of a series of soft US economic data.
At the close the Dow Jones Industrial Average was up 338 points at 31,837, the S&P 500 advanced 62 points to 3,859 and the Nasdaq Composite rose 247 poiints to 11,199.
Weak housing and consumer confidence figures today followed yesterday’s downbeat PMI numbers suggesting that the Fed’s medicine of higher interest rates was taking its toll on the US economy.
Also grabbing investor attention was a slew of third-quarter earnings with the reporting season firing on all cylinders with a number of tech heavyweights due to report after the bell as well.
Two winners today were Coca-Cola Co which rose 2.48% after the company upped its revenue and profit forecasts, banking on steady demand amid price increases and General Motors which reaffirmed its outlook after posting solid earnings, sending its shares jumping 3.9%.
12.05pm: US markets ride earnings wave
US indices were on the rise midday as investor sentiment saw the Federal Reserve’s interest rate hikes approaching a terminal rate.
At midday, the S&P 500 was up by 1.3% at 3,845, while the Nasdaq Composite was up by 1.9% at 11,165 and the Dow Jones rose by 0.8% to 31,757 points.
Joshua Mahony, senior market analyst at online trading platform IG, said markets have continued their upbeat tone despite continued warning signs about economic difficulties ahead.
“Rising rates will likely bring unwelcome consequences, but markets are at least appearing positive at the thought that central banks will soon see their tightening phase run its course. Unfortunately, there is a strong chance that we will soon see that stubbornly high inflation could result in rates remaining elevated for longer than desired. Nonetheless, with yields drifting lower and the dollar on the back foot, we are seeing risk assets gain traction once again today,” Mahony wrote in a report.
Tech stocks on deck today include Microsoft, Alphabet and Twitter.
General Motors reported 3Q revenues of US$41.89 billion, slightly less than the $42.22 billion expected by analysts, but beat expectations on adjusted earnings per share of US$2.25 compared to $1.88 for the same period last year.
The major movers at midday included EV maker Lucid Group, up by 9.8% after announcing the launch of an at-home charging station as part of the company’s accessory line-up. Life sciences company IQVIA Holdings was up by 9.25% and both healthcare insurance company Centene and research company Charles River Laboratories rose by over 8%.
On the downside, insurance company Brown & Brown (NYSE:BRO) dropped by almost 12%, marking a four-month low, after the insurance brokerage posted third-quarter results that missed analyst expectations. Electric systems company Cadence Design fell by over 4%, and insurance lines writer WR Berkeley slid by 3.7%
9.35am: Tech earnings in focus
US stocks opened mixed as investors await the release of earnings from tech giants Microsoft and Alphabet due after the bell today.
Just after the market opened, the Dow Jones Industrial Average had shed 45 points or 0.1% at 31,454 points, while the S&P 500 was up 9 points or 0.2% at 3,806 points and the Nasdaq Composite had added 77 points or 0.7% at 11,032 points.
Forex.com market analyst Fiona Cincotta said that big tech was often looked at by investors for clues surrounding the broader economy, such as the health of the consumer.
“If Snap was the canary in the coal mine, investors may be worried about the impact that inflation is having on advertising revenue growth,” she said.
“Advertising spending is usually one of the first areas to see cuts when recession fears rise. Meanwhile, Microsoft is expected to post the slowest revenue growth in over five years.”
Carmaker General Motors Company (NYSE:GM) was up about 2.2% at the open after posting mixed quarterly results, including better-than-expected profit and a revenue miss.
The Coca-Cola Company (NYSE:KO) had also gained about 2% reporting quarterly profit and revenue that topped expectations, with the beverage company raising its full-year outlook.
On the other hand, German sportswear brand adidas AG's stock was down about 8.1% on the news it is terminating its contract with the musician Ye, formerly known as Kanye West, following his antisemitic comments. The company said it would take a hit of €250 million (about US$247 million) to its income this year as a result of immediately ending the partnership.
6.30am: Big tech still in focus
US stocks were expected to open lower on Tuesday ahead of key quarterly earnings figures from big tech companies including computer giant Microsoft and Google owner, Alphabet.
Futures for the Dow Jones Industrial Average were 0.4% lower in pre-market trading, while those for the S&P 500 were also down 0.4%, and contracts for the Nasdaq-100 shed 0.2%.
With the earnings season now in full swing, investors will be looking to key earnings figures for maintain direction after Monday’s sharp gains.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted that Alphabet’s revenue is expected to rise, but be slower than recent quarters while its earnings per share is expected to be dented by a challenging advertisement business, and rising competition from TikTok.
“If there is one thing that could save the day is the cloud revenue, which has been one of the key growth drivers. But even that is expected to reveal a slower growth compared to previous quarters,” she said.
Turning to tech giant Microsoft, the picture is not rosy either, she warned.
Microsoft is expected to reveal its fifth consecutive quarter of slowing revenue, led by a steep decline in PC demand, the strong US dollar, and faltering macroeconomic conditions, she said, noting that as at Google, investors will focus on how Microsoft’s cloud segment did last quarter.
“It’s important to remember that soft results don’t necessarily mean negative market reaction. If the soft results still beat the market estimates, we could see Google, and Microsoft shares rally,” Ozkardeskaya said.
Yesterday, investors took in their stride falls in key economic indicators. The S&P Global Manufacturing PMI data showed a decline to 49.9 from 52 in September, while the services PMI slumped to 46.6 from 49.3. Both indicators fell short of expectations.
Investors are beginning to hope that softer economic data will persuade US rate-setters to step back from continuing to hike interest rates aggressively. The Federal Reserve has raised interest rates by three 75 basis points hikes this year as it attempts to head off inflation which remains at around 40-year highs.
Further ahead, earnings from Facebook’s Meta, due on Wednesday, and Apple and Amazon on Thursday, will come into focus.
Contact the author at jon.hopkins@proactiveinvestors.com