S&P500 and Nasdaq 100: Market Sentiment Turns Bearish Post-Earnings

Market Mixed as Key Stocks React to Earnings

U.S. stock futures showed a mixed picture Thursday as investors digested a flurry of corporate earnings and awaited crucial economic data releases. This follows a challenging session on Wall Street, with the S&P 500 and Nasdaq Composite experiencing their worst declines since 2022.

Tech Sector Struggles

Wednesday’s market downturn was primarily driven by disappointing quarterly reports from tech giants Alphabet and Tesla. This negative sentiment spilled over to other major tech stocks, including Nvidia and Microsoft.

Airline Industry Turbulence

Southwest Airlines reported a 46% drop in second-quarter profit, with shares falling 4% in premarket trading. The airline faces significant challenges:

• Forecast of potential unit revenue decline up to 2% in Q3
• Non-fuel costs expected to rise as much as 13%
• Reduced aircraft deliveries from Boeing

Despite these headwinds, Southwest beat earnings expectations with adjusted EPS of $0.58 versus the anticipated $0.51.

American Airlines also struggled, forecasting a drop in unit revenue of up to 4.5% for Q3. Shares plummeted over 7% in premarket trading.

Mixed Earnings Results

Ford Motor shares tumbled 13% after second-quarter earnings fell short of expectations. In contrast, Chipotle added 3% on strong earnings and increased restaurant traffic. IBM and ServiceNow also rose after beating expectations.

Honeywell shares dropped 4.5% due to weak third-quarter guidance, despite surpassing Q2 expectations.

Market Sector Rotation

While tech stocks struggled, the utilities sector emerged as a bright spot, gaining 1.16% on Wednesday. NextEra Energy, Eversource Energy, and Consolidated Edison led the sector’s gains.

Economic Data in Focus

Investors are closely watching upcoming releases of jobless claims data and preliminary second-quarter GDP figures, which could provide insights into the overall economic health and future market direction.

Market Forecast

The short-term outlook remains cautious, with the market in a “show me” state regarding AI profitability and productivity. While some sectors like cruise lines and U.S. infrastructure show promise, tech giants may continue to face pressure. Investors should watch for potential sector rotations, monitor upcoming economic data, and pay close attention to individual stock performances as earnings season progresses.

Technical Analysis

E-mini S&P 500 Index futures are lower shortly before the cash market opening. The benchmark is currently on the weak side of the 50-day moving average at 5500.05, which is new resistance. The index is also straddling a 50% level at 5463.25.

Look for the bearish tone to continue on a sustained move under 5463.25. Selling pressure could actually intensify with a near-term target of 5205.50.

On the flipside, overcoming the 50-day MA at 5500.05 will be a sign of strength. This could trigger a powerful intraday short-covering rally into the close.