Flood of earnings reports leaves Wall Street mixed as small stocks continue to rise

Trader Gregory Rowe works on the floor of the New York Stock Exchange, Monday, July 22. AP-Yonhap

US stocks remained relatively steady on Wall Street on Tuesday as the earnings reporting season for major companies got underway.

The S&P 500 fell 8.67 points, or 0.2 percent, to 5,555.74. The Dow Jones Industrial Average fell slightly, 57.35, or 0.1 percent, to 40,358.09, and the Nasdaq Composite fell 10.22, or 0.1 percent, to 17,997.35.

But the smaller stocks in the Russell 2000 continued their big run, rising 1 percent. They have recently turned around in the market’s rankings, soaring amid hopes of coming rate cuts.

The mixed trading came as dozens of companies reported spring results, headlined by Alphabet and Tesla, after trading closed for the day. Expectations are high, with analysts predicting the strongest earnings growth for S&P 500 companies since late 2021, according to FactSet.

UPS was one of the heaviest stocks in the S&P 500, falling 12.1 percent after spring earnings and revenue came in below analysts’ expectations.

But CEO Carol Tomé said the company’s U.S. arm delivered more packages than a year earlier, the first growth in nine quarters, calling it a “significant turning point for our business.”

Nvidia was the stock that dragged down the S&P 500 the most. Its 0.8 percent loss for the day was relatively modest, but the S&P 500 tends to give more weight to larger stocks, and Nvidia is worth more than $3 trillion.

Comcast fell 2.6 percent after reporting spring earnings that fell short of expectations. The biggest declines came from lower attendance at its U.S. theme parks and from its studio business, which lacked the kind of big hits of last year’s “The Super Mario Bros.” and “Fast X.”

GE Aerospace offset those losses with a 5.7 percent increase after beating analysts’ profit expectations in the spring and raising its full-year profit forecast.

Zions Bancorp. rose 6.2 percent after reporting better-than-expected earnings for its latest quarter. It and shares of other regional banks continue to recover from the sector’s mini-crisis that began in March 2023, triggered by the punishing effects of high interest rates.

Sherwin-Williams is another company that has felt the sting of high interest rates, which are meant to control inflation. The company rose 6.9 percent after posting better-than-expected profit in the latest quarter. The company said it is seeing growth in demand for paint from new residential customers, and expects that momentum to continue throughout the year.

That’s despite high mortgage rates that have cooled the housing market. A report Tuesday showed that sales of previously occupied homes fell even more in June than economists had expected. Sales have slowed in part because prices for previously occupied homes are at their highest levels ever, according to the National Association of Realtors.

A United Parcel Service driver drives through a neighborhood while delivering packages, June 30, 2023, in Haverhill, Massachusetts. AP-Yonhap

Easier times may be ahead for interest rates. With inflation slowing, the consensus on Wall Street is that the Federal Reserve will begin cutting key interest rates in September. That would provide some relief for both the economy and financial markets after the Fed kept the federal funds rate at its highest level in more than two decades.

Treasury yields have fallen since the spring on such expectations, and they remain below their highs reached in April. The yield on the 10-year Treasury note held steady at 4.25 percent, where it was in late trading Monday.

Hopes of coming rate cuts have helped smaller stocks in particular lately, which stand to benefit more from lower rates than their larger rivals.

It’s a sharp turnaround for smaller stocks, which have lagged their larger rivals for a while, led by a small group known as the “Magnificent Seven.” Analysts see it as an encouraging sign when more stocks join a rising market, rather than just a few dominant elites.

Corporate earnings will generally have to meet a high bar of expectations to keep the U.S. stock market near its record highs, especially as critics say stocks don’t look cheap after so much gain. What CEOs say about upcoming earnings will also be important, as investors watch for hints that companies are becoming less able to keep their prices high, said Chris Haverland, global equity strategist at Wells Fargo Investment Institute.

On foreign stock exchanges, the indices in Asia and Europe showed a mixed picture.

Chinese markets were among the weakest, with shares falling 0.9 percent in Hong Kong and 1.6 percent in Shanghai. Analysts described the People’s Bank of China’s central bank’s moves on Monday to cut two key interest rates as uninspiring. (AP)