Nasdaq 100, Dow Jones, S&P 500 News: Mixed Earnings Results Stir Investor Concerns

Stocks Reversing Earlier Gains

The major U.S. stock indexes are lower as we approach the mid-session on Wednesday after giving back earlier gains as investors dealt with a complex blend of falling crude prices, Federal Reserve’s cautious comments, and geopolitical tensions. Amid mixed quarterly earnings and uncertain economic forecasts, the market displayed resilience but also evident caution.

At 16:00 GMT, the Dow Jones Industrial Average is trading 37544.01, down 154.96 or -0.41%. The S&P 500 Index is at 5018.60, down 31.81 or -0.65% and the Nasdaq Composite is trading 15718.36, down 146.90 or -0.93%.

Federal Reserve Influence

Tuesday’s comments by Federal Reserve Chair Jerome Powell, emphasizing the prolonged battle against inflation, led to a shift in investor expectations from a potential rate cut in September to possibly December. Further compounding the hawkish tone, Fed Vice Chair Philip Jefferson suggested that if inflation persists, the current restrictive monetary policies may extend. These developments have led to a reassessment in the Fed funds futures, now indicating only a 40 basis point cut by year-end, a cycle low according to Deutsche Bank.

Earnings Season Impact

Early earnings reports have set a mixed tone for the market. While United Airlines soared 12% following a revenue beat, ASML experienced a 6% drop after failing to meet order expectations. With 43 S&P 500 companies reported, those missing both earnings and revenue estimates faced an average stock decline of over 10% the following day, starkly higher than the five-year average of 3.1%.

Geopolitical and Economic Risks

Heightened tensions in the Middle East and ongoing rate concerns have stifled the early-year stock rally. Meanwhile, Bank of America’s survey highlighted a growing belief among investors in a “no landing” scenario for the U.S. economy, suggesting that inflation may not reach the Fed’s 2% target soon but economic growth will continue.

Market Forecast

Looking ahead to the close, the market’s direction appears increasingly dependent on the unfolding earnings season and persistent economic indicators. With a cautious outlook on interest rate cuts and inflation control, the short-term market sentiment leans bearish. Investors will need to closely monitor upcoming earnings reports and Federal Reserve signals to gauge potential market movements.

Technical Analysis

After making three feeble attempts to turn the market higher for the week, E-mini Dow Jones futures appear ready to resume its downtrend.

If the downside momentum should continue then investors will likely put the 200-day moving average at 37006 on the radar as a key target and potential support.

Meanwhile, the intermediate trend is down with the blue chip average trading well below the 50-day moving average at 39269, which is new resistance.