LRCX Lam Research Corporation

By Michael Wursthorn 

The S&P 500 edged higher 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 rose in the final hours of trading to clinch a 0.2% gain after bobbing around the flatline during the busiest day of the corporate earnings season. The tepid move obscured bigger swings in shares of individual companies that reported quarterly results.

On one end, shares of Twitter, 3M, Ford and eBay all suffered steep declines after reporting disappointing earnings, weighing on the index. On the other, 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 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.

The S&P 500 added 5.77 points to 3010.29, as technology stocks within the broad index jumped 1.5% following upbeat earnings from that sector. The Nasdaq Composite added 66 points, or 0.8%, to 8185.80, while the Dow Jones Industrial Average continued to underperform broader benchmarks, falling 28.42 points, or 0.1%, to 26805.53.

Shares of 3M fell $6.87, or 4.1%, to $161.89, dragging the Dow industrials firmly lower throughout the day. 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 $8.08, or 21%, to $30.75 after the social-media company's third-quarter earnings fell short of expectations. Its fourth-quarter revenue forecast also disappointed investors.

EBay fell $3.58, or 9.1%, to $35.62 after the online marketplace forecast its first quarterly revenue decline in four years. Ford shares dropped 61 cents, or 6.6%, to $8.60 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.

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 $2.70, or 2%, to $139.94.

PayPal, meanwhile, said results for its latest quarter topped expectations, sending shares up $8.27, or 8.6%, to $104.91, 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 $45, or 18%, to $299.68, their biggest single-day gain since May 2013.

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.

Several companies reported results after the stock market closed, including Amazon.com, which missed analysts' earnings forecasts and provided lower-than-expected sales guidance for the fourth quarter. Shares were recently down 8% in after-hours trading.

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.

Avantika Chilkoti contributed to this article.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

October 24, 2019 17:08 ET (21:08 GMT)

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