Stocks rise as earnings continue to rise

Stocks rise as earnings continue to rise

U.S. stocks rose on Tuesday as Wall Street looked to end a strong first month of 2023 amid a continued flurry of corporate earnings and the start of the Federal Reserve’s latest policy meeting.

The S&P 500 (^GSPC) edged up nearly 0.8% during Tuesday’s midday session, while the Dow Jones Industrial Average (^DJI) rose 0.4%. The tech-heavy Nasdaq Composite (^IXIC) added about 1.1%.

The yield on the benchmark 10-year US Treasury fell to 3.501% from 3.546% on Monday. The dollar index fell 0.06% to $102.22.

Major US stock averages fell on Monday, kicking off a week filled with major macro events and tech earnings. For the session, tech underperformed, with the Nasdaq losing 2% on the index’s worst day since December 2022.

Oil stabilized after trading sharply lower ahead of Wednesday’s OPEC+ meeting as oil ministers review production levels. The OPEC+ Joint Ministerial Monitoring Committee is expected to approve the group’s current oil production policy.

The most important item on the macroeconomic calendar is the FOMC policy meeting, which begins Tuesday ahead of Wednesday’s scheduled decision to hike rates by a quarter of a percentage point, bringing fed funds back to a target range of 4.5% to 4.75%. Still, it’s unclear what might happen next.

“[We] expect Powell to be quite hawkish at the press conference,” Michael Feroli, chief U.S. economist at JP Morgan, wrote in a note. “We expect him to emphasize two themes: (i) the slowdown doesn’t stop, and (ii) don’t expect 23 rate cuts.”

Jerome Powell, Chairman of the Board of Governors of the Federal Reserve, attends a central bank symposium at the Grand Hotel in Stockholm, Sweden, January 10, 2023. - Senior central bank officials and prominent academics participated to four panels on central bank independence from various angles, climate, payments, mandates and global policy coordination.  - Sweden OUT (Photo by Claudio BRESCIANI / TT News Agency / AFP) / Sweden OUT (Photo by CLAUDIO BRESCIANI/TT News Agency/AFP via Getty Images)

Jerome Powell, Chairman of the Board of Governors of the Federal Reserve, attends a Central Bank Symposium at the Grand Hotel in Stockholm, Sweden on January 10, 2023. (Photo by CLAUDIO BRESCIANI/TT News Agency/AFP via Getty Images)

It’s also an important week for the European Central Bank and the Bank of England, as officials are widely expected to raise benchmark interest rates by 50 basis points on Thursday. Such a move would mark a slowdown from last year’s aggressive increases as inflation slows and unemployment levels remain low.

Elsewhere on the economic data front, consumer confidence fell to 107.1 from 109.0 the previous month, but remains above July 2022 levels, according to the Conference Board. Economists polled by Bloomberg were forecasting a range of 105.0 to 112.5.

Earnings season is in full swing

The busiest week of the fourth-quarter earnings season has begun, with more than 100 companies accounting for nearly a third of the S&P 500’s market value release results.

Shares of Exxon Mobil (XOM) fell nearly 2% on Tuesday after the company reported better-than-expected fourth-quarter earnings, while revenue fell short. The oil giant posted quarterly adjusted earnings per share of $3.40 compared to analyst forecasts of $3.29. Revenue for the quarter was $95.43 billion, below expectations of $97.3 billion.

Shares of McDonald’s (MCD) fell after the company announced fourth-quarter results on Tuesday morning that beat expectations as more customers visited the fast-food chain amid higher menu prices. Revenue for the quarter was $5.93 billion versus $5.75 billion expected, while the company posted adjusted earnings per share of $2.59 versus analysts’ forecast of 2 $.44.

Shares of General Motors (GM) rallied on Tuesday. The stock is having its best day since October 2022. The automaker reported a 15% rise in fourth-quarter net profit amid weak consumer spending.

United Parcel Service (UPS) reported lower revenue in the fourth quarter as the company delivered fewer items during the holiday season. Revenue for the quarter fell 2.7% to $27.0 billion, missing analysts’ expectations of $28.09 billion. UPS reported adjusted earnings of $3.62 per share for the quarter ended Dec. 31, beating expectations of $3.59 per share.

Caterpillar Inc. (CAT) reported quarterly profit below expectations, the first time since the start of the pandemic. Caterpillar on Tuesday reported fourth-quarter adjusted earnings of $3.86 per share, while analysts had expected $3.97.

Spotify (SPOT) reported fourth-quarter results that gave investors a mixed outlook as the company posted a bigger-than-expected loss and gross margin overshoot. Missed fourth quarter revenue. Meanwhile, the total number of monthly active users exceeded expectations, reaching 489 million against 478 million expected.

Finally, shares of Pfizer (PFE) fell after the pharmaceutical giant reported adjusted earnings of $1.14 per share on sales of $24.29 billion. The company said it expects sales to decline in 2023, including a sharp decline in sales of its COVID vaccine.

Elsewhere in the markets, shares of Carvana (CVNA) jumped 33% on Monday and rose again on Tuesday morning. According to data from Bespoke Investments, Carvana is in the list of the 35 most shorted stocks on the Russell 1000 right now. These stocks are on average up 18.8% this year.

Meanwhile, things will quickly turn to technology after the bell. Snap (SNAP) should provide a first glimpse of what’s to come in the world of online advertising, user growth and consumer spending, after Microsoft (MSFT) reported a continued slowdown in cloud growth in December.

Meta Platforms (META) is expected to release quarterly results on Wednesday, while Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) are gearing up for Thursday.

Overseas, the International Monetary Fund said Monday it expects the global economy to slow. In the United States, economic growth will slow to 1.4% this year as central banks continue to work to bring inflation under control, the IMF said.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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