U.S. stocks dipped Thursday as investors continued to monitor a steady stream of corporate earnings results against a backdrop of elevated inflation and further Fed policy tightening.
The S&P 500 fell Thursday afternoon to erase earlier gains. The Dow Jones Industrial Average also turned lower. The Nasdaq fell and extended Wednesday’s losses, when the tech-heavy index was weighed down by a slide in shares of Netflix. Meanwhile, Tesla (TLSA) shares jumped after the electric vehicle-maker handily exceeded expectations in its fiscal first-quarter results.
The so far mixed quarterly earnings results this reporting season have stirred up uncertainty over whether corporate profits will be able to bolster equity markets operating in an already challenging economic environment. With inflation running at its fastest rate in 40 years and weighing on economic activity, and the the U.S. Federal Reserve on track to ramp up its tightening regime despite decelerating growth, many pundits have warned of further choppiness in risk assets.
“The big question is whether the earnings can really sustain this kind of a macro backdrop of slower growth and [tighter] Fed policy,” Deepak Puri, Deutsche Bank wealth management chief investment officer, told Yahoo Finance Live on Wednesday. “It seems certain companies can — historically that’s been the case. What’s different this time is really the trifecta, which is higher costs of capital, quantitative tightening, plus a lack of … a big fiscal stimulus.”
A similar market environment was seen in 2017 and 2018, when the Federal Reserve last raised interest rates before this year, Puri added. However, at that time, a reduction in the corporate tax rate under the prior administration had helped “cushion some of the burden of a higher cost of capital,” Puri said.
“This time around, I’m not really seeing much fiscal spending coming our way,” Puri said. “So it could be one of those times where the market might be a little bit more volatile than what participants expect.”
Other pundits also suggested tepid profit growth this year may be insufficient to propel the market forward, especially in the case of a slowdown in tech company results, given that many of these names are some of the most heavily weighted in the major equity indexes.
“Here’s the biggest risk in my opinion to the broader market right now: The broader market is concentrated in just a handful of names. What happens if their earnings or guidance for the second quarter is very dismal, or if they have a second-quarter earnings report … that really surprises to the downside? That’s when you’ll see that downdraft in the S&P, in my opinion,” Eddie Ghabour, co-founder and managing partner at Key Advisors Group, told Yahoo Finance Live on Wednesday.
“No one is bulletproof in this environment,” he added. “And I think being cautious here after the massive run up we’ve seen in the last several years in risk assets is just a prudent thing to do. Because there will be some amazing buying opportunities that will come when this bubble bursts.”
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12:51 p.m. ET: San Francisco Fed’s Daly says interest rates should move ‘expeditiously’ toward neutral
San Francisco Federal Reserve President Mary Daly said Thursday that interest rates should move higher swiftly this year in the face of elevated inflation.
“I like to think of it as expeditiously marching towards neutral. It’s clear the economy doesn’t need the accommodation we’re providing,” Daly told Yahoo Finance’s Brian Cheung in an exclusive interview Thursday.
Daly, who is not a voting member in this year’s Federal Open Market Committee but still participants in monetary policy discussions with the committee, said she supports raising the benchmark federal funds rate by 50 basis points at the central bank’s next policy-setting meeting in early May. Such a move would mark the first hike of more than 25 basis points from the Fed since 2000.
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10:21 a.m. ET: Elon Musk is mulling a tender offer to buy Twitter, has received $46.5 billion in commitment letters
Tesla CEO Elon Musk is considering acquiring shares of Twitter (TWTR) via tender offer at a price of $54.20 per share, according to a filing on Thursday.
Musk has so far received approximately $46.5 billion in commitment letters for financing, the filing said. With a tender offer, Musk would purchase shares directly from current shareholders in order to ultimately acquire Twitter.
The filing comes after Musk last week issued an offer to purchase Twitter for $54.20 per share, equivalent to more than $40 billion. However, Twitter last week adopted a “poison pill,” or limited duration shareholder rights plans, to try and ward off a takeover and prevent Musk from amassing a larger stake in the firm. Musk disclosed he had taken a more than 9% stake in Twitter earlier this month.
Twitter shares rose 0.4% intraday Thursday morning.
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9:30 a.m. ET: Stocks open higher, tech shares stage a recovery after Netflix-led slide
Here’s where markets were trading just after the opening bell:
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S&P 500 (^GSPC): +46.97 (+1.05%) to 4,506.42
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Dow (^DJI): +289.18 (+0.82%) to 35,449.97
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Nasdaq (^IXIC): +209.64 (+1.56%) to 13,666.46
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Crude (CL=F): +$1.80 (+1.76%) to $103.99
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Gold (GC=F): -$6.20 (-0.32%) to $1,949.40 per ounce
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10-year Treasury (^TNX): +4.1 bps to yield 2.877%
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8:35 a.m ET: Weekly unemployment claims come in at 184,000, holding near multi-decade lows
Weekly unemployment claims held near their lowest levels since the 1960s, with a strong labor market and improving levels of unemployment remaining a bright spot in the U.S. economy.
First-time jobless claims totaled 184,000 during the week ended April 16, according to the Labor Department’s latest weekly report. Claims had totaled 186,000 a week earlier.
Though initial filings edged up slightly in the latest weekly data, the sum remained near 50-year lows. New claims had reached their lowest level since 1968 at 166,000 just last month.
Continuing claims, which tally the number of Americans collecting benefits for multiple weeks, have also declined sharply to reach multi-decade lows. These came in below 1.5 million for a back-to-back week to reach their lowest level since 1970.
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7:39 a.m. ET: Stock futures head for a higher open
Here’s where stocks were trading Thursday morning:
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S&P 500 futures (ES=F): +38 (+0.85%) to 4,493.50
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Dow futures (YM=F): +233 (+0.66%) to 35,312.00
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Nasdaq futures (NQ=F): +170.25 (+1.22%) to 14,175.00
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Crude (CL=F): +$0.98 (+0.96%) to $103.17
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Gold (GC=F): -$12.40 (-0.63%) to $1,943.20 per ounce
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10-year Treasury (^TNX): +3.3 bps to yield 2.869%
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6:12 p.m. ET: Stock futures trade little changed
Here’s where stocks were trading Tuesday evening:
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S&P 500 futures (ES=F): +14.25 (+0.32%) to 4,469.75
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Dow futures (YM=F): +74.00 (+0.21%) to 35,153
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Nasdaq futures (NQ=F): +70.25 (+0.50%) to 14,075
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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