There are different segments in the market with different performance outlooks and while the payments ecosystem took a slight hit, the earnings in the banking sector have been mixed across the board.
The ongoing American earning season has pulled the mainstream stock indices lower as investors digested performances that show a contracting economy. While the performances of companies that have released their performance reports thus far have been mixed, the revenue cut from multinational electric automaker Tesla Inc (NASDAQ: TSLA) stirred a deep dive into the growth momentum of key stock indices.
The Nasdaq Composite (INDEXNASDAQ: .IXIC) lead the losses and slumped by 0.80% to 12,059.56. The Dow Jones Industrial Average (INDEXDJX: .DJI) also dropped by 0.33% and closed Thursday’s session at 33,786.62. Notably, the S&P 500 Index (INDEXSP: .INX) was not left behind and it slid by 0.60% to its current value of 4,129.79.
The outlook of the stock indices has forced them to print their worst weekly close since March. With the Dow Jones dropping off by its 4-week winning streak, both the S&P 500 and the Nasdaq Composite have lost 0.2% and 0.5% respectively for the week.
“Though, so far, it seems that equities have rallied, sentiment has been okay, and you’re seeing equity volatility continue to grind lower, the story from corporates is that margins are under pressure and we continue to see that decline,” said Anna Han, equity strategist at Wells Fargo Securities.
While companies that have reported their performances like International Business Machines IBM (NYSE: IBM) unveiled a better than expected revenue on their top and bottom lines, others like banking giant Morgan Stanley (NYSE: MS) failed to meet expectations. Tesla shares particularly took a big hit and dragged down the tech-heavy Nasdaq Composite when it posted a 20% lower net income from its year-ago period.
Tesla shares closed Thursday’s trading down by 9.75% to $162.99. The shares are seeing slight growth in the after-hours where they have added 11 cents thus far.
Stock Indices and the Component Performances
There are different segments in the market with different performance outlooks and while the payments ecosystem took a slight hit, the earnings in the banking sector have been mixed across the board.
Data released by FactSet yesterday showed that as many as 16% of the firms featured on the S&P 500 have released their performance reports thus far. Of these firms, a total of 76% have surpassed their Earning Per Shares forecast. With the season set to extend into the coming week, investors expectations are mounted.
“If we see a lot of degradation over the course of next week because of guidance … that might cause a multiple contraction and we might see some of the S&P 500 sell off,” said Art Hogan, chief market strategist at B. Riley Financial, “But that just hasn’t been the case yet.”
Though the interest of most investors is hinged on the current earnings season, the potential disposition of the Feds to an interest rate hike is also of great concern. Speculations currently mount on the direction the Feds will take ahead of the May policy meeting. As should be expected, the market will price in the event as the days draw near.
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