The stock rally that catapulted the S&P 500 to a 16-month high lost momentum after a flurry of companies reported disappointing earnings.
(Bloomberg) — The stock rally that catapulted the S&P 500 to a 16-month high lost momentum after a flurry of companies reported disappointing earnings.
JetBlue Airways Corp. sank after slashing its full-year profit forecast and saying it would earn less than analysts expected this quarter. Pfizer Inc. slipped after the drugmaker reduced its sales outlook. Cruise operators fell as Norwegian Cruise Holdings Ltd. gave an earnings guidance that trailed the average analyst estimate. BMW AG dropped after warning about higher costs for developing electric cars, while logistics giant DHL Group gave a profit guidance that missed analyst estimates.
The results highlight growing concern about the durability of corporate earnings and questions about whether stocks can keep gaining. With the S&P 500 now less than 5% away from an all-time high, there are signs that investors are taking a pause before US employment figures and earnings from giants Apple Inc. and Amazon.com Inc.
“When we look forward from here, we feel that the drivers for the rally may become a little bit more mixed,” said Karim Chedid, head of EMEA iShares investment strategy at BlackRock International. “We still don’t feel that the trough in earnings has come yet. Whilst the macro picture has been stronger than expected, there is no doubt that the tightening from central bank policy is starting to come through.”
The S&P 500 halted a two-day advance. The dollar rose against all of its Group-of-10 counterparts. Treasury yields climbed across the curve.
The S&P 500 on Tuesday received its most bullish outlook from Oppenheimer Asset Management, which predicts further strength in stocks as the Federal Reserve nears a pivot and the US economy stays resilient.
Strategists Scramble to Catch Up as S&P 500 Rally Rumbles On
Chief Investment Strategist John Stoltzfus raised his year-end price target on the index to 4,900, leaving room for a near 7% advance through the end of the year, the most bullish among Wall Street strategists tracked by Bloomberg. The S&P 500 would end the year about 28% higher at a record if his forecast materializes, the best performance since 2019.
“A broadening of the rally across S&P 500 sectors suggests that the bull market that emerged from the October 2022 lows has legs to run higher into 2024,” Stoltzfus said.
In other individual stock moves Tuesday, Uber Technologies Inc. climbed after the ride-hailing company reported better-than-expected net income. JetBlue Airways Corp. fell after slashing its profit forecast. Caterpillar Inc. gained as profit from the maker of yellow bulldozers and excavators beat expectations.
In China, home sales plunged by the most in a year last month, underscoring why policymakers need to address faltering demand and a liquidity crunch in the sector. Caixin PMI figures showed factory activity contracted in July, missing economists’ estimates for a small expansion.
The yen traded weaker against the dollar, adding to Monday’s decline, amid sluggish demand at a 10-year bond auction. While investors had earlier anticipated that the Bank of Japan is moving toward letting yields rise after a tweak to its yield-curve control policy, it bought bonds on Monday to anchor rates.
The Australian dollar declined against the greenback after the nation’s central bank unexpectedly held interest rates unchanged and traders pared bets on further tightening.
Key events this week:
- US construction spending, ISM Manufacturing, job openings, light vehicle sales, Tuesday
- China Caixin Services PMI, Thursday
- Eurozone S&P Global Eurozone Services PMI, PPI, Thursday
- Bank of England rate decision, Thursday
- US initial jobless claims, productivity, factory orders, ISM Services, Thursday
- Eurozone retail sales, Friday
- US unemployment rate, non-farm payrolls, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.3% as of 9:31 a.m. New York time
- The Nasdaq 100 fell 0.4%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 fell 0.7%
- The MSCI World index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.2% to $1.0975
- The British pound fell 0.5% to $1.2776
- The Japanese yen fell 0.6% to 143.21 per dollar
Cryptocurrencies
- Bitcoin fell 1.1% to $28,887.85
- Ether fell 1% to $1,833.88
Bonds
- The yield on 10-year Treasuries advanced six basis points to 4.01%
- Germany’s 10-year yield advanced four basis points to 2.53%
- Britain’s 10-year yield advanced five basis points to 4.36%
Commodities
- West Texas Intermediate crude fell 0.7% to $81.23 a barrel
- Gold futures fell 1.2% to $1,985.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Sujata Rao.
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