Stocks struggled for direction Tuesday as investors took in the latest round of corporate earnings reports and a mid-afternoon speech from Fed Chair Jerome Powell.
At the close, the S&P 500 (-0.2% at 5,051) and the Nasdaq Composite (-0.1% at 15,865) suffered modest losses but were well off their session lows. The Dow Jones Industrial Average (+0.2% at 37,798) held on for a win as UnitedHealth Group (UNH) soared 5.2% after earnings.
In its first quarter, the insurance giant disclosed earnings of $6.91 per share on revenue of $99.8 billion. Analysts were expecting earnings of $6.14 per share on revenue of $92.4 billion. The earnings are adjusted and don't include the $682 million loss UnitedHealth incurred from the Change Healthcare data leak.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
At roughly $470, UNH stock has the greatest weighting of all 30 stocks in the price-weighted Dow. As such, its gains helped offset post-earnings losses for fellow Dow Jones stock Johnson & Johnson (JNJ, -2.1%).
Bank of America sinks after earnings
Elsewhere on the earnings calendar, Bank of America (BAC) stock fell 3.5% as a year-over-year decline in Q1 net interest income – caused by "higher deposit costs," according to the press release – overshadowed top- and bottom-line beats.
Morgan Stanley (MS) saw its shares climb 2.5% on higher-than-expected first-quarter earnings and revenue. The company also said its return on tangible common equity (ROTCE) – a profitability measure for banks – rose to 19.7% from 16.9% in the year-ago period.
"The performance here was excellent, like Goldman Sachs (GS, -1.0%), but wealth management was the best aspect of the report for me," says David Wagner, portfolio manager at Aptus Capital Advisors, while adding that capital markets have been a positive for all of the major banks so far this earnings season. "Historically, it's been about where many of these banks are positioned within investment banking, but it appears that a rising tide has been lifting all capital market boats here," Wagner notes.
Loop Capital gives Super Micro Computer a Street-high price target
In non-earnings news, Super Micro Computer (SMCI) surged 10.6% after Loop Capital analyst Ananda Baruah lifted his price target on the recent addition to the S&P 500 to $1,500 from $600. This represents implied upside of more than 50% to current levels.
SMCI has already been a powerhouse on the price charts, having more than tripled for the year-to-date. "Our work suggests business remains healthy [for the AI server, software and infrastructure company], and we're anticipating robust March quarter results and a strong June quarter guide," Baruah wrote in a note to clients.
The analyst believes Super Micro Computer can post annual earnings of $50 to $60 per share by fiscal 2026 on revenue of $30 billion to $40 billion. For context, the company reported fiscal 2023 earnings of $11.81 per share on $7.1 billion in revenue.
Powell speech temporarily rocks stocks
A mid-afternoon speech from Fed Chair Powell temporarily sent a jolt through the stock market, though the main indexes quickly came off their session lows.
At the Wilson Center think tank in Washington, D.C., Powell said "more recent data show solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal." Powell added that the data are not giving the Fed the confidence it needs to start cutting interest rates. "If higher inflation does persist, we can maintain the current level of restriction for as long as needed," he said.
"Fed Chair Powell moved more decidedly in a hawkish direction as he essentially underscored that the downward trajectory of inflation has essentially stalled," said Quincy Krosby, chief global strategist for LPL Financial. "Moreover, he made it clear – rather than his more ambiguous stance regarding a rate easing timetable – that the 'higher for longer' narrative remains intact."
Heading into 2024, most folks anticipated four to six quarter-point rate cuts this year, with the first expected to occur at the Fed's March meeting. These expectations have drastically shifted following a steady stream of strong jobs data and hotter-than-anticipated inflation reports. According to CME Group's FedWatch Tool, futures traders are currently pricing in a 46% chance the Fed will announce its first rate cut in September, up from 30% one month ago.
Related content
- What Does Tesla Stock's Latest Slide Mean for Investors?
- Kiplinger's Economic Calendar
- When Is the Next Fed Meeting?
-
The ‘First Year of Retirement’ RuleThe 'first year of retirement' rule says the 12 months after you leave work set the tone for your entire later life — so it's vital to approach them mindfully.
-
Tech Stocks Drag This Growth Fund DownA rough stretch for mega-cap tech and tech-adjacent names has put pressure on this Mairs & Powers mutual fund.
-
Tech Stocks Drag This Growth Fund Down
A rough stretch for mega-cap tech and tech-adjacent names has put pressure on this Mairs & Powers mutual fund.
-
Timing Is Everything for Roth Conversions: An Expert's Guide to the Right StrategyUnderstanding the nuances of Roth conversions can help you avoid forking over more money in taxes than you need to.
-
Are You Ready for the Emotional Side of Retirement?Financial adviser warns that life after work is coming, so start preparing … mentally, as well as financially. If you're nervous, take heart. Some simple strategies could ease the way.
-
Stock Market Today: Dow Dives 769 Points on Iran-Israel ConflictLosses accelerated in afternoon trading amid reports Iran retaliated against Israel.
-
Four Ways to Help Prevent a Market Downturn From Scrambling Your Nest EggYou may not be able to avoid a market decline when you're newly retired and starting to rely on your nest egg for income, but you can plan for that risk.
-
Is Your Home Disaster-Ready? An Insurance Expert's Guide to Preparing for Storms and FiresHomeowners can take these steps to protect their properties from hurricanes, tornadoes, wildfires and hail, while also potentially reducing their insurance costs.
-
Stock Market Today: Stocks Rise as Treasury Yields DropA round of not-too-terrible economic data helped boost the bond market Thursday.
-
A Financial Adviser's Defense of Annuities: They're Just MisunderstoodAnnuities can offer retirement income stability and security against market volatility, though some do have drawbacks. The key is to understand their features before buying.
