Stocks traded slightly higher Wednesday, as investors waded through a flood of corporate earnings reports, with better-than-expected results from blue-chip names, including Apple, Dow and McDonalds, helping to overshadow some of the concerns related to the coronavirus outbreak.
The Federal Reserve left its policy interest rate unchanged as expected and said the economy is growing at a moderate pace, but Fed chair Jerome Powell acknowledged that the coronavirus epidemic in China introduces “uncertainty” into the outlook and asset valuations were “somewhat elevated”.
What are major indexes doing?
The Dow Jones Industrial Average
DJIA, +0.14%
rose 86 points, or 0.3%, to 28,812, while the S&P 500 index
SPX, +0.02%
gained 7 points, or 0.2%, to 3,282. The Nasdaq Composite Index
COMP, +0.17%
advanced 33 points, or 0.4%, to 9,302.
The Dow on Tuesday rose 187.05 points, or 0.7%, to end at 28,722.85, snapping a five-day losing streak and taking back a chunk of the previous session’s decline, which was the steepest one-day fall since October. The S&P 500 which has also suffered its biggest one-day drop since October on Monday, rose 32.61 points, or 1%, to finish at 3,276.24. The Nasdaq Composite closed at 9,269.68, up 130.37 points, or 1.4%.
What’s driving the market?
Stocks recovered more of the ground lost during the selloffs on Friday and Monday which were sparked by fears a coronavirus epidemic in China would slow global economic growth. By Wednesday there were about 6,000 confirmed cases, and the death toll had risen to 132.
Related: Growing number of airlines cancel flights to contain global spread of coronavirus
Investors in U.S. stocks, however, were more focused on a slew of fresh corporate earnings reports with Dow components Apple Inc.
AAPL, +2.22%
and Dow Inc.
DOW, +5.04%
rising on the backs of better-than-expected earnings reports.
See: Analysts divided on how much further Apple shares can climb after ‘blowout results’
Apple shares gained 3% to trade at a record high, after the company reported its second-best quarter for iPhone sales in the company’s history late Tuesday, while shares of Dow gained 4% after the materials sciences company reported adjusted profit and sales that fell less than expected.
“Who cares about a potential global pandemic when Apple reports results like that?” wrote Paul Hickey of Bespoke Investment Group in a Wednesday note.
So far, nearly 25% of S&P 500 companies have reported results for the previous quarter. Of those companies, nearly 72% have beaten analyst expectations, FactSet data shows.
“The current view is that earnings will be up around 10% in 2020, but early-in-the-year estimates generally come down as the year wears on,” Byron Wien, Vice Chairman, Private Wealth Solutions, at Blackstone, wrote in an annual outlook note.
“Geopolitical uncertainty and the twists in the outlook for the presidential election should create several market corrections of 5%, but none greater than 10%,” he added. “While the economic environment is not particularly strong, investors will become comfortable that the longer- term outlook remains favorable, albeit subdued,” he said.
In other news, the Federal Reserve held its benchmark fed funds interest rate steady in a range between 1.5% and 1.75%. on Wednesday, as expected, saying the economy remained on a moderate growth path. The Fed also said it would continue its support for short term money markets with repo operations and buy Treasury bills into the second quarter.
“News that the Fed is still increasing its balance sheet will be music to the stock market’s ears as many investors believe the liquidity somehow makes its way into the stock market helping to fuel the rally,” MUFG chief economist Chris Rupkey said.
In economic data, the U.S. trade deficit rose 8.5% in the fourth quarter, the Commerce Department said Wednesday.
The National Association of Realtors said its index of pending home sales fell 4.9% in December from the previous month.
Which companies are in focus?
Boeing Co.
BA, +2.26%
reported a surprise loss for the fourth quarter and revenue that declined below analyst expectations amid the company’s struggles linked to the extended grounding of its 737 Max airplanes. Shares rose 2.7%, though they have lost 7.2% during the past 3 months, versus a 6.6% rise for the Dow.
McDonald’s Corp.
MCD, +2.04%
on Wednesday reported fourth-quarter earnings and revenue that beat expectations. Shares rose 1.7%.
Shares of chip maker Advanced Micro Devices Inc.
AMD, -5.95%
were down 6.7%. AMD late Tuesday offered an outlook that was weaker than Wall Street analysts had expected, while data-center sales disappointed.
Shares of online auction site eBay Inc.
EBAY, -4.14%
fell 3%. The company late Tuesday reported fourth-quarter earnings that beat the consensus forecast, but offered weak first-quarter revenue guidance.
Coffee-chain Starbucks Corp.
SBUX, -2.07%
late Tuesday topped forecasts with its fiscal first-quarter earnings and called its holiday season “one of the strongest” in its history. But it also warned that China’s coronavirus outbreak was likely to hit its bottom line this year. Shares declined 3%
Victoria Secret parent L Brands Inc.
LB, +12.67%
is exploring strategic alternatives for the lingerie brand, including a full or partial sale, according to a report in The Wall Street Journal. L Brands’ stock rose 9%.
Shares of General Electric Co.
GE, +10.44%
rose 10% after the industrial conglomerate reported fourth-quarter profit and revenue that topped expectations, while its earning outlook was below forecasts.
Shares of AT&T Inc.
T, -3.59%
T, -3.59%
were off 3.5% after the media and telecommunications giant reported better-than-expected fourth-quarter earnings but fell short of forecasts on revenue.
How are other markets trading?
In the bond market, the yield on the 10-year U.S. Treasury note
TMUBMUSD10Y, -4.00%
fell 2 basis points to 1.62%.
Oil futures declined Wednesday after the U.S. government data reported domestic crude inventories posted a bigger-than-expected weekly rise. West Texas Intermediate crude for March delivery
CLH20, -0.73%
on the New York Mercantile Exchange fell 15 cents, or 0.3%, to $53.33 a barrel.
Gold futures finished with a slight gain on Wednesday, then held ground close to that settlement after the U.S. Federal Reserve left its benchmark short-term interest rate unchanged. February gold
GCG20, +0.36%
was at $1,569.90 an ounce in electronic trading, shortly after the Fed policy statement.
The U.S. dollar edged 0.1% higher against a basket of its rival currencies, according to the ICE U.S. Dollar index
DXY, +0.06%.
European stocks edged up with the Stoxx Europe 600
SXXP, +0.44%
ending up 0.44% at 419.41.
In Asia overnight, stocks traded mixed, with markets in China closed in an extension of the Lunar New Year holiday enacted as authorities deal with the effects of the coronavirus outbreak. In Hong Kong, the Hang Seng Index
HSI, -2.82%
tumbled 2.8%, while Japan’s Nikkei 225
NIK, +0.71%
gained 0.7%.
Source : MTV
