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Stocks rise as investors gauge earnings growth

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US stocks rose sharply on Tuesday as investors priced in the company’s next round of earnings.

The underlying S&P 500 gained 2% and the Dow Jones Industrial Average jumped 510 points, or about 1.7%, as of 1225 pm ET. The Nasdaq Composite Technology Index rose 2.3%.

Commerce Department housing data released Tuesday showed U.S. new home construction activity fell 2% in June to its lowest level since September 2021 as new construction projects also contracted, the latest signs of higher mortgages and high housing prices are beginning to put pressure on the market. once a popular housing market.

On the earnings front, the likes of Johnson & Johnson (JNJ), Truist Financial (TFC) and Lockheed Martin (LMT) released their second-quarter results Tuesday morning, with Netflix (NFLX) taking center stage after the close of trading. Shares rose almost 4% ahead of the report, despite expectations that inflation, increased competition and increased subscriber churn would be evident in the results.

Johnson & Johnson reported earnings for the period that beat analysts’ estimates but lowered its full-year sales and earnings forecast, pointing to the impact of a stronger US dollar. Shares changed little on Tuesday.

Meanwhile, shares of IBM (IBM) tumbled 6.6% despite record earnings after the software giant cut its free cash flow forecasts for this year, citing a currency crackdown and loss of business in Russia.

Of the 35 S&P 500 companies (comprising 10% of the index) that released second-quarter results as of July 15, 43% of companies outperformed sales and earnings per share, below the historical post-week average of 47%, and the weakest share since the first quarter of 2020, according to Bank of America Research.

Another 16% of companies plan to report by Friday, including tech giants Tesla (TSLA) and Twitter (TWTR) later this week as profits expand beyond banks into 11 other sectors.

INDIA – 07/07/2022: In this photo illustration, the Tesla logo is displayed on a smartphone screen in the background of Elon Musk’s Twitter page. (Photo illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)

“We expect second-quarter earnings per share to “meet” a flurry of downward revisions at best,” BofA analysts said in a note on Monday, adding that details on several key topics are important: demand forecast, pricing, currency markets. , and layoffs.

Federal Reserve officials have signaled they are likely to raise interest rates by 75 basis points at their next policy-setting meeting on July 26 and 27 after government data showed last week that U.S. consumer prices accelerated by the most in June. at a rapid annual rate since November 1981.

The Fed should “educate the public that there’s not much they can do, especially to bring down inflation in the short term,” Brian Jacobsen, senior investment strategist at Allspring Global Investments, told Yahoo Finance Live. “If there’s one lesson from history, it’s that if the Fed wants to tame inflation very quickly, the only way they can do it is by taking really extreme steps – it has to be some number of shock and awe that will economically devastating, so I don’t think they’ll like the collateral damage.”

Tuesday’s moves came after the previous session’s rally was reversed in the final hour of trading amid a Bloomberg News report that indicated Apple (AAPL) plans to slow hiring and cut spending next year in preparation for a potential economic slowdown. .

Alexandra Semyonova, correspondent for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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