Markets flat after day of mixed earnings reports
Wall Street closed Tuesday almost exactly where it began after a mixed set of profit reports led to a quiet, meandering day of trading.
The S&P 500 edged up by 3.55 points, or 0.1%, to 4,154.87 after drifting between small gains and losses. The Dow Jones Industrial Average slipped 10.55 points, or less than 0.1%, to 33,976.63 and the Nasdaq composite was down 4.31 points, or less than 0.1%, to 12,153.41.
Shares of Lockheed Martin Corp. were one of Wall Street’s bigger gainers. The stock climbed 2.4% after the company reported a profit for the latest quarter that topped analysts’ expectations.
Shares of Bank of America Corp. rose 0.6% after its better-than-expected profit report led to an up-and-down day of trading. The majority of companies so far this reporting season have been beating forecasts.
The bar, though, was low amid Wall Street’s worries about still-high inflation, much higher interest rates and slowing in some sections of the economy. Analysts came into this reporting season forecasting the sharpest drop in earnings per share for S&P 500 companies since the pandemic torpedoed the economy in 2020.
Several companies stumbled after failing to meet expectations. The Goldman Sachs Group fell 1.7% after its revenue fell short of analysts’ forecasts, though earnings topped expectations.
Health care stocks were broadly weak and proved the heaviest weight Tuesday on the S&P 500. Shares of Johnson & Johnson fell 2.8% despite the company reporting stronger profit than expected and raising its dividend.
Several dozen more companies in the S&P 500 will report quarterly financials later this week, including AT&T Inc., Tesla Inc. and The Procter & Gamble Co.
Wall Street’s attention will also turn to regional banks set to report this week, including KeyCorp and Zions Bancorp. Shares of such midsize banks took a hit last month after the collapse of Silicon Valley Bank and New York-based Signature Bank, the secondand third-largest U.S. bank failures in history.
The worry was that customers would pull deposits at once out of the banks after the failures. Most of the focus has been on regional banks instead of “too-big-tofail” lenders such as JPMorgan Chase & Co. and Bank of America.
Those bigger banks have so far been reporting better profits than expected, and their immense sizes likely helped lure added deposits amid the turmoil. The banks also have been a highlight of the earliest days of this reporting season, helping add some calm to markets.
“It appears that major bank earnings announcements helped soothe investors’ nervousness for financial stocks reporting in the upcoming days,” Stefano Pascale and other analysts at Barclays said in a report.
A larger worry for the economy is that banking industry woes will cause a pullback in lending. That in turn is expected to add more pressure on an economy already straining under the weight of much higher interest rates.
The Federal Reserve has raised rates at a furious pace over the past year in hopes of slowing high inflation, from near zero at the start of last year. Higher rates can suffocate inflation, but only by slowing the entire economy in one blunt action, raising the risk of a recession and hurting investment prices.
Inflation is slowing but remains high, and traders widely expect the Fed to raise rates again at its next meeting in May.
Treasury yields have been climbing recently on such expectations but eased a bit Tuesday. The 10-year yield fell to 3.57% from 3.61% late Monday. It helps set rates for mortgages and other major loans. The two-year yield, which moves more on expectations for the Fed, slipped to 4.19% from 4.21%.
Abroad, stocks were mixed across Asia and modestly higher in Europe.
China’s economy accelerated in the first three months of the year and topped forecasts as consumers returned to shops and restaurants after the country eased its “anti-covid” restrictions. The hope is that stronger growth out of the world’s second-largest economy can help support the broader global economy.