On Tuesday, stocks experienced relatively unchanged performance as investors took a moment to digest a multitude of earnings results following a significant rally in the previous session. The Dow Jones Industrial Average managed to gain 47 points, representing a modest increase of 0.1%. In contrast, the S&P 500 dipped by 0.1%, while the Nasdaq Composite fell by 0.3%.
A trio of old economy stocks witnessed notable gains, buoyed by better-than-expected quarterly results. General Motors experienced a significant surge of 12% after the company raised its guidance for the full year and exceeded analyst estimates. Notably, the Detroit automaker also revised its forecast regarding the impact of President Donald Trump's tariffs, stating that it anticipates offsetting around 35% of that financial hit.
In addition to General Motors, both Coca-Cola and 3M saw their stock prices rise by 3% and over 2%, respectively, following their latest earnings reports that also surpassed Wall Street's expectations. Furthermore, Zions Bancorp climbed 2% after reporting third-quarter profits that improved from the previous year, despite revealing some problematic loans late last week that had contributed to a broader market sell-off.
As we look ahead, investors are closely monitoring a pivotal week for third-quarter earnings. Major companies such as Netflix are set to report after the bell on Tuesday, with Tesla scheduled for Wednesday. A strong start to the earnings season thus far has been a key factor supporting the broader market rally, particularly amid an ongoing economic data blackout due to the government shutdown.
According to FactSet, over three-quarters of the S&P 500 companies that have reported results to date have exceeded expectations. Major tech firms are anticipated to play a critical role in overall profits, especially as the interest in artificial intelligence remains robust. The so-called "Magnificent Seven" companies are projected to see year-over-year earnings growth of 14.9%, in comparison to a modest 6.7% for the remaining 493 companies within the index.
If the Magnificent Seven can meet or surpass elevated profit expectations, markets might experience another upward movement. Recent trading activity on Friday and Monday suggests that investors are starting to favor Big Tech ahead of these crucial profit reports. According to Anthony Saglimbene, chief market strategist at Ameriprise Financial, the results from this tech group could significantly influence the broader market direction as we approach year-end.
With elevated expectations and high valuations, the performance of these tech giants could be pivotal. Profit outperformance, coupled with stable outlooks and strong AI momentum, may be well-received as we progress through the earnings season. However, some analysts caution that current stock prices may already reflect these positive sentiments.
Contributing to positive market sentiment is the anticipation of a potential quarter-percentage-point rate cut at the upcoming Federal Reserve meeting in late October. Investors are also awaiting important consumer price index data due on Friday, which is expected to provide critical insights into the state of inflation and may influence the central bank's forthcoming decisions.
