Wall Street dips as weak corporate guidance fuels recession fears

2023-01-25T19:21:55Z
A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 14, 2022. REUTERS/Andrew Kelly

Wall Street turned lower on Wednesday as a string of corporate earnings ran the gamut from downbeat to dismal, reviving worries over an economic downturn.

All three major U.S. stock indexes were red, but off session lows. The tech-laden Nasdaq was down the most after Microsoft Corp (MSFT.O), the first major technology firm to post quarterly results, offered dour guidance and raised red flags with respect to its megacap peers which have yet to report.

“The slowdown in the economy and in the labor market is starting to materialize,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.

“For most of last year, the big concern was inflation and the only way to bring it down is to cool the economy,” Pursche added. “We’re doing that. It’s a natural progression, but it’s unnerving to investors.”

Fourth-quarter earnings season has shifted into overdrive, with 95 of the companies in the S&P 500 having reported. Of those, 67% have beat consensus estimates, well below the 76% average beat rate over the past four quarters, according to Refintiv.

Analysts now see aggregate S&P 500 earnings dropping 3.0% year-on-year, nearly double the 1.6% drop seen on Jan. 1, per Refinitiv.

The Dow Jones Industrial Average (.DJI) fell 67.67 points, or 0.2%, to 33,666.29, the S&P 500 (.SPX) lost 14.05 points, or 0.35%, to 4,002.9 and the Nasdaq Composite (.IXIC) dropped 74.04 points, or 0.65%, to 11,260.23.

Most of the 11 sectors of the S&P 500 were red, utilities (.SPLRCU) suffering the largest percentage loss.

Boeing Co’s (BA.N) shares reversed an earlier dip, eking out a 0.8% gain after the plane maker posted widening losses for 2022, but reported its first positive cash flow since 2018 on the strength of commercial airplane deliveries.

Abbott Laboratories (ABT.N) dropped 2.0%, as weaker-than-expected medical device sales weighed on the stock.

Among gainers, News Corp (NWSA.O) jumped 5.2% Rupert Murdoch withdrew a proposal to reunite News Corp and Fox Corp.

AT&T Inc (T.N) also delivered disappointing guidance but its renewed focus on its telecoms business helped boost subscriber numbers, sending its shares up 6.0%.

General Dynamics Corp (GD.N) beat quarterly expectations, but a weak 2023 forecast helped send the defense contractor’s shares sliding 3.2%.

Electric automaker Tesla Inc (TSLA.O) is among the more closely watched corporate results expected after the closing bell.

Finally, in a post-script to Tuesday’s technical glitch which halted the opening auctions for a spate of stocks and prompted a review by the U.S. Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE) said a manual error resulted in the snafu which caused widespread confusion at the opening bell.

Declining issues outnumbered advancing ones on the NYSE by a 1.28-to-1 ratio; on Nasdaq, a 1.36-to-1 ratio favored decliners.

The S&P 500 posted 6 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 52 new highs and 26 new lows.

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