By Stan Choe
Wall Street barely budged again on Wednesday following another set of mixed earnings reports from big U.S. companies.
The S&P 500 inched down by 0.35 points, or less than 0.1%, to 4,154.42. The Dow Jones Industrial Average slipped 79.62, or 0.2%, to 33,897.01, and the Nasdaq composite edged up by 3.81 points, or less than 0.1%, to 12,157.23.
Tesla weighed heavily on the market after the electric-vehicle company cut prices for its two top-selling models, its fourth price cut in the U.S. this year. That could be a signal Tesla is trying to spur sales amid shifting U.S. tax credits for electric vehicles. Tesla fell 2% before releasing its latest earnings report after trading closed.
Netflix slumped 3.2% after reporting weaker revenue for the latest quarter than analysts expected, though its profit topped forecasts.
Elevance Health dropped 5.3% despite reporting stronger profit and revenue than expected. The health insurer gave a forecast for earnings this year that fell short of some analysts' expectations.
So far, most companies have been beating profit forecasts to clear a bar that was set particularly low. Analysts came into this reporting season forecasting the sharpest drop S&P 500 earnings since the pandemic torpedoed the global economy in 2020. Profits are under pressure because inflation is high, interest rates are much higher than a year ago and portions of the economy are slowing.
“That’s part of the reason why the market has been kind of directionless” recently, said Megan Horneman, chief investment officer at Verdence Capital Advisors. “We got mixed earnings, but not as bad as people expected.”
Intuitive Surgical leaped 10.9% for one of the biggest gains in the S&P 500 after delivering stronger profit and revenue for the latest quarter than expected.
Abbott Laboratories rose 7.8%, Nasdaq Inc. gained 3.1% and United Airlines flew 7.5% higher after they also topped Wall Street’s expectations for profits.
Particular focus has been on the health of banks after higher interest rates helped lead to the second- and third-largest U.S. bank failures in history last month.
The industry's behemoths have largely reported better results than expected, with several saying they benefited from the industry's turmoil as customers moved deposits to them and away from smaller banks that seemed at greater risk.
The fear was how much pain smaller, regional banks would show in their quarterly reports, including how many of their customers fled.
Western Alliance Bancorp., a Phoenix-based bank whose stock plunged nearly 64% over a five-day stretch last month, surged after it said deposits stabilized after an initial drop and have been rising in recent weeks. Its stock jumped 24.1%.
It helped lead the majority of financial stocks higher.
Synchrony Financial rose 1.8% after reporting better revenue than expected but weaker profit. Morgan Stanley rose 0.7% after topping forecasts for both profit and revenue.
In the bond market, yields climbed after a report showed U.K. inflation remained above 10% for a seventh straight month.
Central banks around the world have been raising rates at a furious pace for more than a year, and the wide expectation is for the Federal Reserve to raise short-term U.S. rates again at its meeting next month. High rates can stifle inflation, but only by slowing the entire economy, raising the risk of a recession and hurting prices for investments.
The yield on the 10-year Treasury rose to 3.59% from 3.58% late Tuesday. The two-year Treasury yield, which more closely tracks expectations for the Fed, rose to 4.25% from 4.20%.
Another fear for markets is that smaller and mid-sized banks could pull back on their lending amid all the industry's struggles, which would clamp the brakes even tighter on the economy. The Federal Reserve said Wednesday that several of its 12 regional districts have noticed banks tightening lending standards recently.
“When I look at economic growth, there’s so many components of economic growth that are screaming we’re either in a recession or heading that way,” Horneman said.
She has been preparing for more turbulence in the stock market on expectations interest rates will stay high through the end of the year, despite forecasts by many traders that the Fed will cut rates.
In markets overseas, stock indexes were mixed in Europe. Asian stocks were mostly lower.
An earlier report showing China’s economic growth accelerated in the latest quarter has not had much of an impact on share prices. While consumption and retail sales have grown, other indicators, such as industrial output and fixed-asset investments, were weaker and indicate an uneven recovery.
“It may still be a worst-is-over story, but recovery has shown to be more gradual than a one-shot wonder,” Yeap Jun Rong, market analyst at IG, said in a report.
AP Business Writers Yuri Kageyama and Matt Ott contributed.