US stocks were trading lower Thursday, retreating from their highest level in six weeks, on mixed earnings reports and weak economic data, although good second-quarter earnings from Tesla Inc. helped to support the tech-heavy Nasdaq Composite.
How stocks are trading
S&P 500 SPX,
shed 4 points, or 0.1, to 3,955.
Dow Jones Industrial Average DJIA,
fell 190 points, or 0.6%, to 31,692.
Nasdaq Composite COMP,
traded 19 points, or 0.2%, higher at 11,914.
Russell 2000 RUT,
index retreated 10 points, or 0.6%, to 1,817.
On Wednesday, the Dow Jones Industrial Average rose 48 points, or 0.15%, to 31875, the S&P 500 increased 0.5%, to 3960, and the Nasdaq Composite gained 1.5% to 11898. The Russell 2000 index has gained 89.53 points or 5.15%. over the last two trading days, its largest two-session percentage gain since January 7, 2021.
What’s driving markets
Better than expected second quarter corporate earnings have helped stocks to recover to their best levels in a month this week but economic data suggest the US economy is slowing.
On the corporate earnings front, shares of Danaher Corporation
Philip Morris International
all traded sharply higher as Wall Street cheered their second-quarter results, although Tesla shares have settled somewhat following a sharp spike in after-hours trading Wednesday.
About 18% of S&P 500 index companies have reported earnings for the second quarter so far and of those, about 71% have beaten expectations, according to FactSet.
Strong earnings and falling Treasury yields have helped support stocks this week — but the outlook for Federal Reserve policy is still of paramount importance for markets, said Matthew Tuttle, CEO of Tuttle Capital Management.
“We’re focused on earnings, we’re focused on rates. Rates are down again this morning, that’s a positive,” he said.
“But I think we’re focused on the battle between two possible scenarios, which is: runaway inflation with really high rates, or recession with rates not as high as we thought they would be, with the possibility of an actual cut.”
Opinion: Tesla’s margins shrink despite ’embarrassing’ price increases, putting Elon Musk in a tough spot
In economic data, US weekly jobless claims continued to rise last week, increasing to more than 250,000 for the first time since November.
The US leading economic index fell for the fourth month in a row and may be pointing to recession around the end of the year, the Conference Board said.
The S&P 500 index in June hit an 18-month low on worries about how surging inflation and tighter monetary policy would crimp company profits, but it has since rallied 8.1% on a belief those fears were overdone.
The improved mood of late is particularly evident in signs of resurgent demand for some of the more speculative stocks that got badly hit over the past year or so.
For example, shares in the ARK Innovation ETF ARKK,
run by high-profile fund manager Cathie Wood, were up 1% on Thursday, having jumped 10.8% over the past five sessions. Still, the fund, which includes the likes of Zoom ZM,
Tesla, Teladoc TDOC,
and Roku ROKU,
is off 61% over the past 12 months.
Some observers remain cautious, however, and worry the latest bounce is just another bear market recovery. The burden of proof is on the bulls to extend the summer rally, said market strategists at Bank of America.
“Even if a summer recovery continues beyond 3946, there is plenty of resistance near 4157-4178 ahead of weaker seasonality into September/October,” said a team of BofA quantitative analysts in a note to clients.
Over in Europe, the European Central Bank hiked its benchmark interest rate for the first time in eleven years, while also approving an “anti-fragmentation tool” intended to stop yields on European bonds from spiraling out of control. The central bank is hiking rates to try and suppress inflation in the eurozone, which has risen sharply in the wake of the pandemic and the war in Ukraine.
Meanwhile, worries about a sharp deterioration in the European economy were somewhat salved after Russia resumed natural gas shipments through the Nord Stream 1 pipeline. The International Monetary Fund had calculated that if the energy conduit was shut for a prolonged period it would push Germany into a sharp recession in 2023.
Events were less positive in Italy, where Prime Minister Mario Draghi resigned after losing the support of some coalition partners. Traders dumped Italian government bonds, pushing yields sharply higher BX:TMBMKIT-10Y, as doubts about Rome’s ability to fulfill conditions necessary to receive its €200 billion ($203 billion) share of the EU’s coronavirus recovery fund grew.
The STOXX 600 index XX:SXXP of European stocks fell 0.1%, and the dollar was barely changed against the euro EURUSD at $1.0170.
Stocks in focus
dropped after lowering its free cash flow guidance although the telecommunications company exceeded expectations in its second quarter.
dropped after beating revenue expectations in the second quarter, and forecasted a third quarter profit, as consumers continue to travel even with higher prices.
Norwegian Cruise Line Holdings
and Royal Caribbean Cruises Ltd.
all slumped after Carnival sold $1 billion in shares.
shares jumped after the automaker reported stronger-than-expected earnings but shrinking automotive gross margins.
How are other assets faring
Oil futures were lower with US crude CL.1,
down 4% to $95.93 a barrel, as energy tensions eased.
The 10-year Treasury yield TMUBMUSD10Y,
fell 10 basis points to 2.930% and German 10-year bund yields TMBMKDE-10Y,
fell 5 basis points to 1.207%.
climbed $13.50, or 0.8%, to $1,713 after trading near its weakest level since early 2021.
fell 3.3% to $22,607 after Elon Musk said Tesla had sold most of its holding of the crypto currency.