The Nasdaq, dominated by technology stocks, faced a downward trajectory on Tuesday as investors braced for a series of high-profile corporate earnings releases and kept a keen eye on the Federal Reserve’s monetary policy meeting.
While the S&P 500 closed nearly unchanged after reaching a new intraday high, the Dow recorded modest gains. However, Alphabet Inc and Microsoft Corp witnessed declines in extended trading following the release of their quarterly earnings reports.
Investors are showing caution and anticipation as they await the earnings reports from what has been dubbed ‘the magnificent seven.’ Peter Tuz, president of Chase Investment Counsel, noted, “The stocks have done incredibly well and there’s a little bit of caution being expressed right now, and maybe rightly so.”
Economically sensitive sectors like Dow Transports, chips, and small caps showed underperformance compared to the broader market. The Labor Department’s report revealing an unexpected rise in job openings added to the market’s stability, suggesting that the Fed might not rush into cutting its key policy rate as early as March.
The Federal Reserve is expected to conclude its policy meeting on Wednesday, likely maintaining its key interest rate at 5.25%-5.50%. Investors will scrutinize the accompanying statement and Fed Chair Jerome Powell’s subsequent press conference for clues on the timing and number of potential rate cuts in the coming year.
Peter Tuz expressed his expectations, saying, “I’m going to be looking for language that matches the storyline that we hope to see in 2024, that sometime in the second quarter we’ll see the beginning of a reduction in rates. I’m going to be listening for language that confirms that that’s the most likely scenario.”
As the fourth-quarter reporting season gains momentum, with announcements from 144 S&P 500 companies, 78% have reported consensus-beating earnings, according to LSEG. Analysts are now anticipating a 5.5% growth in fourth-quarter earnings over the previous year, up from the 4.7% projection at the start of the month.
United Parcel Service (UPS) saw an 8.2% decline after providing a disappointing annual revenue forecast, negatively impacting the transport sector. On a positive note, General Motors surged by 7.8% following an optimistic 2024 earnings forecast, coupled with promises of increased capital return to shareholders. Ford Motor also saw a 2.0% rise.
The S&P 500 concluded with a marginal 0.06% decline at 4,924.97 points. The Nasdaq Composite Index fell by 0.76% to 15,509.90 points, while the Dow Jones Industrial Average rose 0.35% to 38,467.31 points.
Among the S&P 500 sectors, financials led with a 1.2% gain, followed by a 1.01% increase in energy. Boeing Co experienced a 2.3% decline ahead of its quarterly earnings report, drawing increased scrutiny regarding its 737 MAX 7 after a mid-air cabin incident on Jan. 5.
Citigroup and Bank of America rose over 3% following rating upgrades from Morgan Stanley, contributing to a 2.1% gain in the S&P 500 banks index.
While Johnson Controls dropped 3.8% after lowering its full-year profit estimate, MSCI advanced by 9.3% after posting higher fourth-quarter profits. Super Micro Computer rose by 3.5% following a projection of stronger-than-expected quarterly sales.
The market saw more advancing issues than falling ones within the S&P 500, with a ratio of 1.2 to 1. Across the entire U.S. stock market, declining stocks outnumbered rising ones with a ratio of 1.4 to 1.
The S&P 500 marked 80 new highs with no new lows, and the Nasdaq recorded 126 new highs and 75 new lows. Trading volume on U.S. exchanges remained relatively light at 10.3 billion shares, compared to an average of 11.5 billion shares over the previous 20 sessions.