S&P 500, Nasdaq muted as mixed earnings weigh on risk appetite

By Ankika Biswas and Johann M Cherian

(Reuters) – The benchmark S&P 500 and the Nasdaq were flat on Tuesday as a mixed bag of earnings from industry bellwethers threatened to douse a recent rally, while the Dow treaded water on the back of losses in 3M.

3M tumbled 9.5% after forecasting dour annual earnings as the company grapples with weak demand, while General Electric dropped 2.1% after the engine maker’s bleak quarterly profit forecast.

Johnson & Johnson fell 2.5% even after reporting quarterly results a nudge above expectations, while Verizon Communications forecast a strong annual profit and posted its highest quarterly subscriber additions in nearly two years, sending its shares up 4.8%.

All eyes are on the profit outlook for corporate America after major U.S. banks kicked off the ongoing earnings season, which has been mixed so far, with lower profits.

“A lot of these companies which had a pretty good quarter have issued cautious guidance … so that weighs on people’s minds on whether they should be in this market,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Of the S&P 500 companies that have reported results thus far, 86.6% surpassed earnings expectations, compared with 93.1% over a week ago, LSEG data showed.

The benchmark S&P 500 touched a fresh intraday record peak and closed at an all-time high for a second session on Monday, extending a bull-market run, fueled by strength in megacap tech and chip stocks.

The blue-chip Dow also surpassed the 38,000-point mark for the first time on Monday, gaining for the third trading day.

The personal consumption expenditure (PCE) index – the Fed’s preferred inflation gauge – along with the S&P Global PMI readings and an advance fourth-quarter GDP print this week will be key in assessing the central bank’s next policy decision when it meets on Jan. 31.

Wall Street had lost steam at the start of 2024, struck by a mixed bag of inflation data and Federal Reserve policymakers clamping down on market speculation of interest-rate cuts arriving as early as March this year.

Traders’ expectations of U.S. monetary policy easing have now deferred to May, with an 84% odd for an at least 25-basis-point cut, as per the CME Group’s FedWatch Tool, compared with earlier expectations of March.

At 9:48 a.m. ET, the Dow Jones Industrial Average was down 78.55 points, or 0.21%, at 37,923.26, the S&P 500 was up 4.05 points, or 0.08%, at 4,854.48, and the Nasdaq Composite was up 21.07 points, or 0.14%, at 15,381.35.

Eight of the 11 S&P 500 sectors crawled higher, with the communication services sector leading with a 0.7% rise.

D.R. Horton shed 7.3% as the homebuilder missed estimates for first-quarter profit, while Procter & Gamble topped second-quarter profit expectations, sending shares of the consumer goods firm up by 4.8%.

RTX jumped 8.1% on a 10% surge in fourth-quarter revenue, while United Airlines gained 8.3% following an upbeat full-year outlook.

Advancing issues outnumbered decliners by a 1.95-to-1 ratio on the NYSE and by a 1.78-to-1 ratio on the Nasdaq.

The S&P index recorded 22 new 52-week highs and no new low, while the Nasdaq recorded 63 new highs and 37 new lows.

(Reporting by Ankika Biswas, Johann M Cherian and Shubham Batra; Editing by Pooja Desai and Maju Samuel)