Stock Futures Tumble Again on Mixed Earnings, Where Next?

By:JJ Kinahan

Stocks tumble again on mixed earnings, geopolitical worries and economic data

  • The stock market faces a second consecutive drop because of concerns about earnings, geopolitics and economic data.
  • Earnings are mixed: Amazon and Intel outperform, while Meta and Alphabet face challenges.
  • Economic reports surpass expectations and a correction occurs in the Nasdaq, but positive signs emerge amid volatility.

Stocks experienced a second consecutive day of decline as a combination of concerns surrounding earnings, geopolitics, domestic politics and economic data continued to cast a shadow. The S&P 500 suffered a significant drop of nearly 1.2%, while the Nasdaq Composite saw a sharper decline of almost 1.8%. However, following some positive earnings reports from the previous night and a personal consumption expenditures (PCE) report that met expectations, the question remained whether stocks could recover from yesterday’s losses.

Mixed bag of earnings reports

Industry giants, including Facebook's parent, Meta (META) and Google's parent, Alphabet (GOOGL), played a role in yesterday’s market pullback. Both companies exceeded revenue and profit expectations, but analysts appeared determined to identify areas of concern and ultimately succeeded. For Meta, the concern revolved around a warning of potential future weakness in ad sales, leading to a 3.75% drop in its stock price. In the case of Alphabet, the company reported revenue from its Google Cloud division that fell short of expectations, resulting in a 2.7% decline in its shares. Nevertheless, there was positive news after the market closed.

Amazon (AMZN) reported impressive results, surpassing expectations in both revenues and profits. While there was a slight miss in their Web Services division and future revenue guidance, shares of Amazon surged by almost 7% in premarket trading. Intel also delivered better-than-expected revenue and profit numbers, accompanied by a positive forward guidance. In premarket trading, Intel's shares rose by over 6%. An interesting note for both Amazon and Intel was the increase in their margins, which was seen as a positive development.

Exxon Mobil (XOM) reported slightly weaker earnings than expected, leading to minimal changes in its stock price in premarket trading. Chevron also reported weaker-than-expected earnings, causing a 2.5% drop in its stock price. Additionally, Ford's shares traded lower by about 3.5% in premarket after missing on their earnings and withdrawing future guidance because of a labor strike. However, a glimmer of hope appeared when Ford had reached a tentative deal with the United Auto Workers (UAW), potentially ending the strike.

Market data to be released

The week witnessed a flurry of economic data, including the latest numbers on durable goods reported on Thursday. Orders for durable goods increased by 0.5% on a month-over-month basis, surpassing estimates of 0.2%. Gross domestic product (GDP) for the third quarter also exceeded expectations, coming in at 4.9% compared to the expected 4.3%.

In other news, Tesla (TSLA) announced an increase in prices for its long-range Model Y in the U.S., and BP (BP) revealed plans to purchase $100 million worth of Tesla superchargers. Gold saw a small decline in premarket trading but was on track to close higher for the third consecutive week. Oil prices, however, rose by nearly 2% in premarket, despite a potential decline for the week after two consecutive weeks of gains.

Despite the overall strong performance of the market this year, particularly in the tech sector, the Nasdaq 100 officially entered a correction yesterday, defined as a drop of at least 10%. As of yesterday's close, the index was down by over 11%. Nevertheless, positive earnings reports, along with the PCE report not surpassing forecasted strength, offered a flicker of hope. The upcoming week will bring more earnings reports, including Apple (AAPL), as well as the Federal Open Market Committee (FOMC) meeting. Investors were encouraged to stay the course, adhering to their investment plans and long-term objectives.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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