US stocks mixed amidst further earnings reports
The stock market was divided Tuesday as investors struggled to keep building on early 2023 momentum and weighed the latest earnings results.
The Dow Jones Industrial Average lost 1.1 per cent. The Nasdaq Composite rose 0.1 per cent. The S&P 500 fell 0.2 per cent.
When assessing the S&P 500 sectors, they were mostly mixed. leading the way, was Information technology, energy and Real Estate, whilst materials and communication services, lagged behind.
About 7 per cent of the S&P 500 earnings have reported earnings through Tuesday morning, according to FactSet. Of those companies 70 per cent have beaten expectations. United Airlines will report its quarterly results after the bell.
Wall Street is coming off positive back-to-back weeks to start the new year, but investors may have entered a hall of mirrors, according to Mike Wilson, chief U.S. equity strategist at Morgan Stanley. “The rally this year has been led by low quality and heavily shorted stocks. However, it’s also witnessed a strong move in cyclical stocks relative to defensive ones. This move in particular is convincing investors they are missing something and must re-position,” Wilson said.
Year-to-date, the Nasdaq Composite is leading the way up 6 per cent, as investors bought beat-up technology shares amid rising hopes of an improving landscape for growth stocks. The S&P 500 and Dow have advanced about 4 per cent and 2 per cent, respectively, since the start of the year.
Gains have come on the back of the first crop of inflation-related data that investors saw as indicating a contracting economy, with hopes that will give the Federal Reserve justification to slow interest rate hikes once again. Last week, the consumer price index for December showed prices cooled 0.1 per cent from the prior month, but prices were still 6.5 per cent higher than the same month a year ago.
In company news, Goldman Sachs has slid about 6 per cent after the bank reported its worst earnings miss in a decade for the fourth quarter. Its results were pressured by declines in investment banking and asset management revenues. Meanwhile, rival Morgan Stanley posted better-than-expected numbers thanks in part to record wealth management revenue. Its shares jumped 6 per cent.
Those results came after other major banks such as JPMorgan and Citigroup reported mixed quarterly results.
Bank of America's latest Global Fund Manager Survey said managers are less bearish than in Q4 given China and Fed optimism, while recession fears peaked in November.
Cash levels dropped 0.6pp to 5.3 per cent, the biggest decline since June-20 amid rotation into EM, Eurozone.
The shift came at the expense of US stocks, which were most underweight since Oct-05 on record 27pp increase in net underweight.
They also said US rotation is in part driven by the move out of technology stocks, which remain an outsized drag on US markets.
When assessing the long holiday in the states, there have been some significant themes
Companies are pulling back on price increases in response to some backlash from wary consumers, another sign inflation pressure may be easing (WSJ).
Despite the negative revision trend, strategists concerned consensus earnings estimates for 2023 are still too high in the face of recession risk (Bloomberg).
While soft-landing hopes have picked up a little bit, there is still no shortage of headlines about how economists and chief executives believe a US and global recession are likely this year
To local news, The Treasurer’s worst-case scenario for gas prices have become a reality, as the prices have soared 30 per cent in Queensland, 22 per in New South Wales over the past year,
And to make matters worse, retailers are expected to raise prices by an additional 20 per cent starting from next month.
Energy Australia stated on Tuesday that its residential gas customers in Victoria would see their bills increase by an average of 26.7 per cent from February the first, whilst Origin and AGL last week said their rates would increase by 22 per cent and 21 per cent respectively from next month.
Futures
The SPI futures are pointing to a 0.2 per cent gain.
Currency
One Australian dollar at 8:10 AM has strengthened compared to the US dollar yesterday buying 69.85 US cents (Tue: 69.54 US cents).
Commodities
Iron ore futures are pointing to a 1.19 per cent gain. Iron ore is 0.6 per cent higher at US$121.50 tonne.
Gold lost 0.5 per cent. Silver fell 1.2 per cent. Copper added 0.5 per cent and oil gained 1.4 per cent.
Figures around the globe
Across the Atlantic, European markets closed mixed. London’s FTSE fell 0.1 per cent, Frankfurt gained 0.4 per cent and Paris added 0.5 per cent.
In Asian markets, Tokyo’s Nikkei gained 1.2 per cent, Hong Kong’s Hang Seng fell 0.8 per cent and China’s Shanghai Composite closed 0.10 per cent lower.
Yesterday, the Australian sharemarket closed flat at 7,386.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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Source: Finance News Network
