On Tuesday, Wall Street was calm and the US stock market remained relatively stable as the large company earnings season is approaching.
The S&P 500 index fell 8.67 points, or 0.16%, to 5555.74; the Dow Jones Industrial Average fell 57.35 points, or 0.15%, to 40358.09; and the Nasdaq Composite Index fell 10.22 points or 0.1%, to 17997.35 points.
(Source: FX168)
(Source: FX168)
US Presidential Election.
The turbulence surrounding the US presidential election over the past two days has subsided. It is expected that Kamala Harris will receive support to represent the Democratic Party's presidential candidate, which helps to calm any tensions caused by President Joe Biden's withdrawal from the election.
Corporate earnings
On Tuesday, dozens of companies announced their spring performance, including the influential large technology companies Alphabet and Tesla, which will report after the close. FactSet data shows that the market is generally optimistic, with analysts predicting that profits from S&P 500 index component companies will reach the highest level since the end of 2021.
Investors evaluated companies that announced their earnings earlier in the trading session.
Coca-Cola initially rose more than 2% but gave up most of its gains and closed up 0.29%. Coca-Cola's second-quarter revenue growth of 2.9% exceeded expectations, and net income fell 28.8%, with the full-year guidance raised.
General Electric Aviation's stock price rose 5.68% because the company's spring profit exceeded analysts' expectations and raised its full-year profit forecast. This is one of the most powerful driving forces behind the rise of the S&P 500 index.
General Motors fell 6.42% due to strong demand for its main models. General Motors' second-quarter revenue reached a quarterly record high, with adjusted net income soaring 37% year-on-year and full-year profit guidance raised. However, the company plans to delay the launch of the Buick electric vehicle planned for 2024 and postpone the opening of the electric pickup factory by six months to 2026, causing the stock price to decline.
Danaher rose 5.3%. The company reported that the latest quarter's profit and revenue were better than analysts' expectations, partly due to strong performance in its Cepheid molecular detection business.
Sherwin-Williams rose 6.87% because the company's profits also exceeded expectations. The company said that demand for paint from new housing customers is growing and is expected to continue until the end of the year.
Philip Morris rose 2.18%. The data shows that the company's second-quarter revenue was 9.468 billion US dollars, a year-on-year increase of 5.6%, exceeding expectations, and the diluted earnings per share in the second quarter were 1.54 US dollars per share, exceeding expectations. In addition, due to people's enthusiasm for tobacco substitutes and the increasing demand for its Zyn nicotine bags, the company raised its full-year earnings per share growth expectations to 11%-13%.
Comcast initially fell more than 6.4% and closed down 2.58%. The company's second-quarter revenue slightly declined to US$29.7 billion. The company's biggest drop came from the decline in the number of visitors to its US theme parks and the film and television business, which were not as popular as big movies such as "Super Mario Bros." and "Fast and Furious" last year.
United Parcel Service (UPS) fell 12%. The company's second-quarter revenue and adjusted earnings per share were lower than expected. UPS's chief financial officer said that the number of layoffs has reached 11,500, with a target of 12,000.
SAP initially rose more than 7% because the demand for artificial intelligence boosted its second-quarter cloud revenue, which surged 25%.
NXP Semiconductors fell all the way and closed down 7.58%, mainly due to the weakness of the automotive industry, and the third-quarter revenue guidance for NXP Semiconductors was not good. In terms of performance guidance, NXP Semiconductors expects that its revenue in the third quarter will be between US$3.15 billion and US$3.35 billion on a non-GAAP basis, with a median value of US$3.25 billion, while analysts expect the high end of the guidance range to be US$3.35 billion. Based on this guidance, NXP Semiconductors' revenue may accelerate its decline in the third quarter, with a maximum year-on-year decline of nearly 8.2% and a minimum decline of more than 2.3%.
Spotify initially rose nearly 16.2% and closed up 12%. This was mainly due to the fact that Spotify's quarterly paid users exceeded expectations after the company announced price increases. The company's second-quarter paid users increased by 12% year-on-year to 246 million, exceeding the market's expected 245.2 million.
Zions Bancorp. announced that the profit for the latest quarter was better than expected, and the stock price rose 6.16%. The stock prices of it and other regional banks continued to rebound from the industry crisis that began in March 2023, triggered by the punitive impact of high interest rates.
Traders are looking for clues in a large number of corporate earnings reports to see if the market can continue its record-breaking rally, making it difficult for the stock market to gain momentum.
"We expect the earnings season to boost confidence in the stock market," said Solita Marcelli of UBS Global Wealth Management. "Although there may be volatility in the short term, we believe that the fundamentals are still strong after a period of overexpansion of investor positions."
Technology stocks are rotating.
After driving the US stock market up for most of the year, major tech stocks suffered a setback last week. Fears of a slowdown in the market due to Fed rate cuts, threats of more trade restrictions on chipmakers, and concerns that the hype around AI may be overblown, have prompted investors to turn away from high-performing large stocks to higher-risk, underperforming ones.
The market has been digesting the rotation of large stocks that have driven the stock market up this year. Small stocks have benefited from this, with the Russell 2000 rising 3% in the past two days.
Anthony Saglimbene of Ameriprise said, "Given the high earnings expectations for the 'big seven,' there will be a lot to prove in reporting their performance. At the same time, their prospects may come under scrutiny compared to their high valuations."
Although investors are concerned about the continued selling of US tech giants, Barclays strategists say that strong earnings prospects mean that these stocks are still attractive after their recent steep declines.
Bond market
Interest rates may be a little easier. With inflation slowing, Wall Street generally expects the Fed to start lowering its main interest rate in September. After keeping the federal funds rate at its highest level in more than 20 years, this move will bring some relief to the economy and financial markets.
Affected by this expectation, US Treasury yields have been falling since spring, and fell slightly again on Tuesday.
The yield on 10-year US Treasuries fell from 4.25% on Monday night to 4.24%.
Yields on two-year US Treasuries fell slightly after $69 billion of US government bonds were issued, highlighting the market's bet on rate cuts.
Focus stocks
Apple's stock price rose 0.47% as The Information reported that the company is pushing ahead with developing a foldable iPhone.
Nvidia fell 0.77%, a relatively small decline, but the stock was the biggest drag on the S&P 500 index because Nvidia's market cap is over $3 trillion.
Shares of Southwest Airlines fell 1.77% as news broke that the company faces increased regulatory scrutiny over a series of flight safety incidents.
Occidental Petroleum fell 1.36% as the company used investment-grade bonds to finance the acquisition of Texas shale driller CrownRock LP on Tuesday.