U.S. stocks experienced a mixed finish on Wednesday, indicating a slowdown in the momentum witnessed earlier in the week. The S&P 500, after gaining ground in the first two trading days, ended the day virtually unchanged, closing at 5,071.63. The Dow Jones Industrial Average lost a marginal 42.77 points, settling at 38,460.92, while the Nasdaq composite managed to gain 16.11 points, closing at 15,712.75.
Tesla’s stock surged by 12.1%, driven by positive news from the electric vehicle manufacturer. Tesla announced plans to ramp up production of new, more affordable vehicles, a move that has been highly anticipated by investors. This announcement overshadowed the company’s reported 55% drop in profit. Tesla is the first of the “Magnificent Seven” group of stocks to release its earnings results for the start of 2024. Investors are closely monitoring this group as they were major contributors to the U.S. stock market’s gains last year.
The earnings season is in full swing, with Meta Platforms reporting its results after trading ended Wednesday. Alphabet and Microsoft are expected to follow suit a day later. Analysts hope to see profit growth extending beyond the “Magnificent Seven” to a wider range of companies, supported by the robust U.S. economy. However, companies will need to deliver strong profit numbers to justify their current high valuations, especially as interest rates are unlikely to provide much support for stock prices.
Higher Treasury yields in the bond market added pressure on stocks, following a hotter-than-expected report on the U.S. economy. This string of strong economic data has diminished hopes that the Federal Reserve may cut interest rates three times this year as it had previously signaled. A report released Wednesday indicated stronger-than-expected orders for machinery, airplanes, and other long-lasting manufactured goods last month.
The stock market finds itself in a delicate position. While it desires an economy that avoids a sharp recession, it also does not want an overly strong economy that could exacerbate inflation and deter the Fed from cutting rates. The yield on the 10-year Treasury rose to 4.64% from 4.60% late Tuesday.
Among individual stocks, Norfolk Southern fell 3.6% after reporting weaker-than-forecast results for the latest quarter. Boeing declined by 2.9% despite reporting results that were not as disappointing as analysts had feared. The company is facing scrutiny over the safety of its airplanes and has announced steps to improve manufacturing quality, which has slowed down production. Teledyne Technologies witnessed a significant 10.9% loss, becoming one of the market’s biggest decliners. The company, which sells digital imaging sensors, cameras, and other equipment, reported weaker-than-expected profit and revenue. It attributed the decline to weaker demand in industrial automation, test, and measurement markets.
On the positive side, Hasbro jumped by 11.9% after the toy and game company outperformed analysts’ expectations for profit and revenue in the latest quarter. This growth was driven by the success of its Baldur’s Gate 3, Magic: The Gathering games, and Peppa Pig content. Texas Instruments rose by 5.6% after reporting stronger-than-forecast profit and revenue for the latest quarter. Boston Scientific also contributed to the S&P 500’s gains by climbing 5.7% after exceeding profit and revenue expectations.
In overseas markets, Japan’s Nikkei 225 surged by 2.4% as the value of the Japanese yen continues to weaken against the U.S. dollar. The yen has been trading at its lowest level in 34 years, benefiting Japanese exporters but raising concerns about potential intervention from Japanese authorities to strengthen the currency. Stock indexes in most of Asia rose, while European markets experienced modest declines.
