Stocks got up from their intraday lows, but all three main indexes closed down a day before one of Wall Street's most anticipated earnings reports. Government-collected economic data is flowing again. And markets will, of course, note the release of the minutes from the most recent Federal Open Market Committee meeting. But it only sets the stage for numbers and commentary from the leader of the AI revolution after Wednesday's closing bell.
Five of the 11 S&P 500 sectors were down for the day, with declines for consumer discretionary, industrial, utility, financial and technology stocks dramatized by downgrades for big names in three of them. Major questions about the sustainability and the profitability of capex spending for new computing power continue to color this week's price action. Worried about an AI bubble? So is Wall Street.
Meanwhile, the Census Bureau said factory orders increased 1.4% month over month in August, in line with expectations, following a 1.3% decline in July. Orders were up 3.3% year over year. And the National Association of Home Builders Housing Market Index ticked up to 38 in November from 37 in October, but remains in contraction territory.
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Interest rates and the next Fed meeting remain key issues for investors, traders and speculators with the August jobs report now set for release Thursday morning.
But the main event is on the earnings calendar. And it's happening after tomorrow's close.
At Tuesday's closing bell, the tech-heavy Nasdaq Composite was down 1.2% at 22,432, the blue-chip Dow Jones Industrial Average had fallen 1.1% to 46,091, and the broad-based S&P 500 was off 0.8% at 6,617.
HON hit with double downgrade
Honeywell (HON) sank 2.4% after BofA Securities analyst Andrew Obin double downgraded the industrial stock to Underperform, or Sell, from Buy. Obin also reduced his 12-month target price on HON from $265 to $205.
Obin, who notes the conglomerate is separating into two businesses in the second half of 2026, Honeywell Aerospace and Honeywell Automation, says the company has fallen short with its plans for management as well as its earnings forecasts.
"EPS growth has lagged peers," the analyst concludes, "which we expect to continue despite M&A."
MSFT and AMZN get downgraded too
Amazon.com (AMZN) and Microsoft (MSFT), two of the so-called hyperscalers driving exponential growth in AI infrastructure spending, caught downgrades from Rothschild & Co Redburn analyst Alexander Haissl.
Haissl's primary contention is that capital intensity for the generative AI buildout is "significantly higher" compared to cloud computing, while pricing power is notably weaker."
Haissl cut both stocks from Buy to Neutral, or Hold. He maintained his 12-month target price of $250 for AMZN. His new 12-month target price for MSFT is $500, down from $560.
All about Nvidia and the earnings calendar
Home Depot (HD) was the worst of the 30 Dow Jones stocks on Tuesday after the home improvement retailer reported EPS of $3.62 (-1.4% year over year) on sales of $41.35 billion (+2.8% YoY). Analysts expected $3.84 on $41.15 billion. Comparable sales were up 0.2% vs a consensus forecast of 1.3%.
Home Depot said full-year comparable sales would be slightly positive vs a previous forecast of growth of up to 1%. And management now expects EPS to be down 5%, worse than its previous guidance for 2% deterioration. HD shed 6.0%
Despite the top-line recovery, margins remain soft due to increased operating expenses, tariffs on imported goods, rising wages and logistics costs, according to Zacks Investment Management Senior Client Portfolio Manager Brian Mulberry.
"The lack of turnover in the housing market and high financing costs have tapered consumer spending on bigger projects and appliances," Mulberry explained. "That said, by the middle of next year, rates will be lower and other cost structures should move from a headwind to a tailwind, and the long-term growth looks better than the near term."
For the record, Nvidia (NVDA) was down 2.8%. Be sure to tune in to our live Nvidia earnings blog for the latest commentary, numbers when they come out and CEO Jensen Huang's press conference.
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