Stocks sold off Wednesday after the latest batch of corporate earnings intensified concerns that some of the largest U.S. companies are struggling as rates rise and recession fears grow.
The Dow Jones Industrial Average fell 270 points, or 0.80%. The Nasdaq Composite shed 1.3%, and the S&P 500 dropped 1%.
Technology stocks took the bulk of the heat after Microsoft dropped on lackluster guidance. Alphabet, Nvidia and Tesla were last down more than 3% each. Boeing fell 3% following a top-and bottom-line miss.
“If the company is bearish on its own future, why should investors be bullish,” said Adam Sarhan CEO of 50 Park Investments. “That’s pretty much the message we’re getting from earnings season so far.”
Investors bought stocks heading into the period anticipating better-than-expected prints as companies reset and lowered expectations. But reports so far across sectors have mostly dashed those hopes as many companies share dismal outlooks, he said.
Investors are bracing for more high-profile corporate earnings this week as fears of a recession persist, with Tesla
and IBM among the companies slated to post numbers after the bell. So far, more than 19% of S&P 500 companies have reported fourth-quarter earnings, with 68% of them posting stronger-than-expected results, according to FactSet.
This beat rate, however, lags historical trends, according to The Earnings Scout CEO Nick Raich. The average beat rate for fourth-quarter earnings is 79%, he pointed out in a Friday note.
Wednesday’s moves followed a three-day winning streak for the blue-chip Dow. All three major averages are trading flat, or slightly lower, for the week.
J.P. Morgan reiterated its overweight rating on Texas Instrument shares
, saying that the company will maintain its standing as one of the market leaders in high-value analog and embedded products.
“Despite a difficult environment this year (slowing demand along with
GM cost/depreciation headwinds) for Texas Instruments, the team continues to
execute well and maintain strong earnings power even with weaker fundamentals,” said J.P. Morgan Executive Director Harlan Sur.
The semiconductor manufacturer released its fourth quarter earnings yesterday, which marked the first time the company posted a quarterly year-on-year revenue contraction since the post-pandemic recovery. Despite the losses, reported revenue and earnings of $2.13 per share beat analysts expectations of $1.98 per share, according to FactSet.
Texas Instruments share fell 2.25% today, following a small rally under 1% during yesterday’s aftermarket hours.
Don’t expect Google
to be out in the clear any time soon as it faces another antitrust suit, Evercore ISI said.
“We’ve long said that Google faces the greatest overall regulatory and litigation risk among the big tech platforms, and the filing of yet another plausible case against them underscores the cloud that will continue to hang over them,” wrote U.S. policy and politics strategist Tobin Marcus in a note to clients Tuesday.
The comments came as the U.S. Department of Justice on Tuesday filed its second antitrust suit against Google, accusing the tech giant of monopolizing the online advertisement market.
The Wall Street firm believes the regulatory pressure on Google may benefit adtech companies PubMatic
, The Trade Desk
, Magnite
, and Microsoft
subsidiary Xandr. Other than Google, Amazon
and The Trade Desk, both at $10 billion in annual gross advertising spend, are the largest players in the demand-side platform space.