Stocks Inch Higher as Investors Focus on Earnings
October 24 2019 - 4:35PM
Dow Jones News
By Michael Wursthorn and Avantika Chilkoti
The S&P 500 struggled to find direction Thursday, as
investors contended with a mixed bag of corporate profit reports
that offered a murky outlook on the state of the U.S. economy.
The broad index bobbed around the flatline throughout Thursday's
session. The tepid move obscured bigger swings in shares of
individual companies that reported quarterly earnings late
Wednesday and Thursday morning. By 4 p.m. Eastern time, the gains
and losses piled up to leave the S&P 500 a hair above where it
was a day earlier.
On one end, shares of Twitter, 3M, Ford and eBay all suffered
steep declines after reporting disappointing earnings, weighing on
the S&P 500. On the other end, shares of PayPal Holdings,
Microsoft and semiconductor company Lam Research notched solid
gains after topping Wall Street's expectations.
The problem for investors is that the latest earnings reports
likely did little to shore up confidence in the U.S. economy,
giving them few incentives to broadly buy stocks, analysts said.
Growth is clearly weakening, as companies including Ford and 3M
deal with the ongoing effects of the U.S.'s trade war against
China.
And although most companies in the S&P 500 have topped
analysts' expectations so far, the beats haven't been that
impressive, said Larry Adam, chief investment officer at Raymond
James & Associates. Companies on average have beaten estimates
by about 2.9%, Mr. Adam said, below the near 5% average of recent
years.
"There are pockets of softness and we're seeing that," Mr. Adam
said, referring to a global manufacturing slowdown that continues
to hurt companies like 3M. "But we still have a number of bigger
names that have to report still."
A measure of business investment added to Thursday's gloomy
economic picture after the Commerce Department said orders for
long-lasting goods fell in September, snapping three straight
months of gains.
On Thursday, the S&P 500 added 0.2%, as technology stocks
within the broad index jumped following the upbeat earnings. The
Nasdaq Composite added 0.8%, while the Dow Jones Industrial Average
continued to underperform broader benchmarks, falling 29 points, or
0.1%, to 26805 in recent trading.
Earlier, shares of 3M fell 4.3%, dragging the Dow industrials
firmly lower in early-morning trading. The industrial conglomerate
posted lower quarterly sales in some of its core divisions and cut
its earnings forecast for the rest of the year.
Twitter dropped 19% after the social-media company's
third-quarter earnings fell short of expectations. Its
fourth-quarter revenue forecast also disappointed the market.
EBay also fell, shedding 8.9%, after the online marketplace
forecast its first quarterly revenue decline in four years. Ford
shares dropped 6.6% after the car maker lowered its profit target
for the year, sparking worries that a broad restructuring at the
company isn't succeeding in driving earnings growth.
And Baxter International declined 9.1% after the health-products
company said it may need to restate results for at least five
years.
Some of those losses were offset by companies that reported more
upbeat results.
Microsoft reported late Wednesday stronger-than-expected
earnings and revenue, in part due to the company's bet on cloud
computing. Shares jumped 2.2%
PayPal, meanwhile, said results for its latest quarter topped
expectations, sending shares up 8.3%, putting it among the S&P
500's strongest performers.
Shares of Tesla, which isn't in the S&P 500, posted a big
gain after the electric-car maker surprised investors by reporting
a profit for the third quarter, allaying fears that it was
prioritizing growth and production over profit. Shares climbed
16%.
About a third of the companies in the S&P 500 have reported
earnings so far, and 81% of those reports have topped expectations,
according to FactSet. But analysts still estimate the broad index
is on pace to see a quarterly earnings contraction of 4.1% from a
year earlier.
Online retail giant Amazon.com is due to report earnings after
the closing bell, along with Intel and Visa.
Elsewhere, the Stoxx Europe 600 index rose 0.6%, its fourth
consecutive session of gains, after the European Central Bank
decided to leave interest rates unchanged and stuck with a plan to
start buying bonds next month.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and
Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
October 24, 2019 16:20 ET (20:20 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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