By Chris Matthews, MarketWatch , Andrea Riquier
Microsoft, Ford Motor, Tesla and EBay are due to report earnings
late Wednesday
Stocks traded on either side of unchanged Wednesday as investors
digested a slew of earnings reports from some of America's largest
companies, including Dow components Caterpillar Inc. and Boeing
Co., shares of which rose despite both companies reporting
weaker-than-expected earnings declines.
Wall Street is also watching developments pegged to Brexit,
after a vote for a fast-track exit for Britain from the EU was
rejected by parliament on Tuesday, but the delay eases concerns
about the U.K. crashing out of the bloc without a deal on Oct.
31.
How are major indexes faring?
The Dow Jones Industrial Average fell 42 points, or 0.2%, at
26,746, while the S&P 500 index was 2 points lower at 2,995 a
loss of 0.1%. The Nasdaq Composite Index, fell 13 points, or 0.2%,
hitting 8,091, a decrease of 0.2%.
On Tuesday
(http://www.marketwatch.com/story/stock-futures-drift-higher-as-one-of-the-busiest-weeks-for-corporate-earnings-unfolds-2019-10-22),
the Dow lost 39.54 points, or 0.2%, to 26,788.10, the S&P 500
index fell 10.73 points, or 0.4%, to 2,995.99, while the Nasdaq
shed 58.69 points, or 0.7%, to 8,104.30.
What's driving the market?
Results from Caterpillar Inc. (CAT) and Boeing Co.(BA) initially
knocked the market lower in pre-market action on Wednesday, but
stocks turned higher in early trading as investors took positives
away from quarterly results from the blue-chip components.
Caterpillar missed both earnings and revenue estimates and cut
its full-year 2019 earnings outlook
(http://www.marketwatch.com/story/caterpillar-cuts-profit-guidance-as-q3-sales-fall-2019-10-23).
Boeing reported a 50% earnings slide that badly missed estimates
and a revenue slide of 20% or less than expected, but also upheld
its forecast for its 737 Max airliner, grounded since March, to
return to service later this year
(http://www.marketwatch.com/articles/boeing-stock-737-max-to-fly-by-year-end-but-profits-will-fall-51571846882).
The poor results from Caterpillar and Boeing, came amid a slide
in the semiconductor sector following a poor forecast from
(http://www.marketwatch.com/story/texas-instruments-tanks-the-chip-sector-and-investors-hopes-for-a-rebound-2019-10-22)Texas
Instruments Inc. (TXN) in a late-Tuesday earnings report, with a
new revenue estimate range that fell as much as a half-billion
dollars below Wall Street's consensus forecast. That helped drag
the PHLX Semiconductor Index down more than 2%.
Equity markets swung from modest gains to modest losses in
afternoon trade, weighed by technology shares and consumer
discretionary stocks.
(http://www.marketwatch.com/story/texas-instruments-tanks-the-chip-sector-and-investors-hopes-for-a-rebound-2019-10-22)Read:
Boeing, Caterpillar report disappointing earnings, but their shares
bounce back
(http://www.marketwatch.com/story/boeing-caterpillar-report-disappointing-earnings-but-their-shares-bounce-back-2019-10-23)
Most companies, however, have managed to beat expectations for
third-quarter results, albeit off lowered expectations. Thus far,
of the 98 companies that have reported third-quarter results in the
S&P 500, 82.7% have delivered results above analyst
expectations, while 12.2% reported below analyst expectations,
according to research provider Refinitiv. By comparison, 65% tend
to "beat" estimates, and 20% fall below consensus estimates,
according to Refinitiv data going back to 1994.
That said, for companies that have fallen short of expectations,
the magnitude of misses have been great. During October, blended
earnings growth, which combines actual earnings results with
projections for companies that have yet to report, has fallen from
a 3% contraction to a 4.7% contraction, according to FactSet
data.
Meanwhile, Parliament's rejection of Prime Minister Boris
Johnson's legislative schedule
(http://www.marketwatch.com/story/uks-boris-johnson-inches-toward-securing-brexit-but-with-delays-2019-10-23)for
Brexit reduced the likelihood of a departure by Oct. 31 or a
no-deal exit from the EU. The U.K. government has already asked for
an extension to the end of January 2020, and European Council
President Donald Tusk said on Twitter that he would recommend that
request is granted.
In a light day for U.S. economic data, the Federal Housing
Finance Agency's
(https://www.fhfa.gov/AboutUs/Reports/Pages/House-Price-Index-August-2019.aspx)
house price index for August was 0.2% higher for the month,
bringing annual price gains to 4.6%.
For investors, this week is all about earnings, even with a
Federal Reserve meeting set to kick off in less than a week, said
Randy Frederick, vice president of trading and derivatives at the
Schwab Center for Financial Research. Companies are saying, "How we
did this quarter isn't as important as what we expect the future to
hold," Frederick noted.
The Fed announced earlier this month it will purchase more $60
billion a month in Treasury bills to prevent liquidity crunches
that took place earlier this year and is also expected to cut
interest rates for a third time this year next week.
"Investors have been more concerned about slowing growth, which
is reasonable, but I think there's been an overdose of pessimism
about how resilient consumers are," said Kate Warne, principal
investment strategist with Edward Jones. She pointed out that third
quarter earnings have a tough year-over-year comparison, since last
year corporations got a boost from the late-2017 tax cuts. From
that perspective, results that are slightly better than expected is
solid, the strategist said.
"In an environment of job growth, ultra-low interest rates and
central-bank stimulus, this is actually an okay environment and one
in which you need to be putting money into stocks because they can
continue to go higher," she said.
Which stocks are in focus?
Caterpillar (CAT)cut its full-year 2019 earnings outlook as it
reported third-quarter results that also missed Wall Street's
consensus estimates
(http://www.marketwatch.com/story/caterpillar-cuts-profit-guidance-as-q3-sales-fall-2019-10-23).
Shares rose 1.3%.
Boeing (BA) reported a 50% earnings slide that badly missed
estimates and a revenue slide of 20% or less than expected, but
also upheld its forecast for its 737 Max airliner, grounded since
March, to return to service later this year
(http://www.marketwatch.com/articles/boeing-stock-737-max-to-fly-by-year-end-but-profits-will-fall-51571846882).
Texas Instruments(TXN) shares tumbled 7.8% after it reported
earnings per
(http://www.marketwatch.com/story/hilton-worldwide-raises-profit-outlook-2019-10-23)
share of $1.40, excluding certain items, versus the $1.42 analyst
consensus and gave a forecast that was much worse than expected
late Tuesday.
(http://www.marketwatch.com/story/texas-instruments-tanks-the-chip-sector-and-investors-hopes-for-a-rebound-2019-10-22)
Nike Inc. (NKE) shares were down 3% after the sports apparel
company late Tuesday reported that longtime CEO Mark Parker was
stepping down, effective January of next year. He will be replaced
by John Donahoe.
Anthem Inc. (ANTM) reported a 23% increase in third-quarter net
income
(http://www.marketwatch.com/story/anthem-tops-forecasts-on-growing-membership-premium-increases-2019-10-23)to
$1.18 billion, or $4.55 a share, as revenue rose 15% to $26.44
billion after increasing medical enrollment by 1.1 million and
increasing premiums. Adjusted for items, Anthem said it would've
earned $4.87 a share. The health-care company's shares were up
about 1.8%.
Shares of Facebook Inc. (FB) will be in focus as CEO Mark
Zuckerberg will testify on the social-media giant's effort to
launch controversial digital-currency platform Libra. Facebook's
stock was up 1.4%.
Hilton Worldwide Holdings Inc. (HLT) revised its financial
targets for the year on Wednesday. The McLean, Va.-based company
said it now expects systemwide revenue per available room, or
RevPAR, to increase about 1% on a currency neutral basis compared
with 2018. The company had previously forecast an increase between
1% and 2%. Shares rose 4.6% on Wednesday.
Waste Management Inc. (WM)said Wednesday
(http://www.marketwatch.com/story/waste-management-profit-tops-estimates-but-sales-miss-as-recycled-commodity-values-slide-2019-10-23)
it had net income of $495 million, or $1.16 a share, in the third
quarter, down from $499 million, or $1.16 a share, in the
year-earlier period. Shares of the company fell 3%.
Chipotle Mexican Grill Inc. shares (CMG)were down 5.3%
(http://www.marketwatch.com/story/chipotle-stock-climbs-after-earnings-beat-2019-10-22)
after the fast-Mexican company on Tuesday reported third-quarter
net income
(http://www.marketwatch.com/story/chipotle-stock-climbs-after-earnings-beat-2019-10-22)
of $98.6 million, or $3.47 a share, compared with $38.2 million, or
$1.36 a share, in the year-ago period. Adjusted for items such as
restaurant asset impairment expense and restructuring, among other
things, earnings were $3.82 a share.
After the market closes Wednesday, EBay Inc.(EBAY), Microsoft
Corp.(MSFT), Ford Motor Co.(F), and Tesla Inc. (TSLA). are due to
report results.
How are other markets performing?
The 10-year Treasury note yield fell to 1.756% on Wednesday from
1.768% late Tuesday in New York. The mixed corporate outlook has
investors favoring bonds as they wait out the results still due
this week. In Europe, eyes are on Brussels, where an EU agreement
to delay Brexit may lead to U.K. Prime Minister Boris Johnson
seeking an early election.
Oil futures turned higher on Wednesday
(http://www.marketwatch.com/story/oil-futures-fall-1-ahead-of-eia-inventory-report-2019-10-23)
after a U.S. government report showed a decline in U.S. crude
supplies for the first time in six weeks. December WTI crude , on
its first full session as a front-month contract, rose $1.50 cents,
or 2.7%, at $55.94 a barrel on the New York Mercantile Exchange.
Prices were likely to mark their highest settlement so far this
month.
Gold prices enjoyed a fillip from haven buying on Wednesday
(http://www.marketwatch.com/story/gold-attempts-to-halt-3-session-slide-and-creeps-back-toward-1500-2019-10-23)
as a retreat in assets considered risky, amid political
uncertainties like Brexit, underpinned gains in the yellow metal.
Gold gained for a second day. Gold for December delivery on Comex
gained $8.600, or 0.4%, to trade at $1,496.10 an ounce, after
trading little changed on Tuesday.
The ICE U.S. Dollar Index , which tracks the performance of the
greenback against six major rivals, fell less than 0.1% to
97.504.
Elsewhere, the Stoxx Europe 600 closed 0.1% at 395.03. In Asia,
China's CSI 300 index finished off 0.6% at 3,871.08 and the
Shanghai Composite Index slipped 0.4% to 2,941.62, while Hong
Kong's Hang Seng Index fell 0.8% to reach 26,566.73. Japan's Nikkei
225 gained 0.3% to 22,625.38.
-- Mark DeCambre contributed to this report
(END) Dow Jones Newswires
October 23, 2019 14:56 ET (18:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.