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The stocks rally that catapulted the S&P 500 to a 16-month high lost momentum after a flurry of companies reported disappointing earnings. BMW AG dropped more than 6% after warning about higher costs for developing electric cars, while logistics giant DHL Group gave a profit guidance that missed analyst estimates.
ZoomInfo Technologies, which makes business software, plunged 20% in US premarket trading on a lower revenue forecast. The results highlight growing concern about the durability of corporate earnings and questions about whether stocks can keep rallying after notching big gains in July.
With the S&P 500 now less than 5% away from an all-time high, there are signs that investors are taking a pause before a Bank of England interest rates decision on Thursday and US employment figures Friday. The line-up of blockbuster earnings still to come this week includes tech heavyweights Apple Inc. and Amazon.com Inc.
“When we look forward from here, we feel that the drivers for the rally may become a little bit more mixed,” said Karim Chedid, head of EMEA iShares investment strategy at BlackRock International. While futures suggest a weaker open on Wall Street later, the buoyant mood of the past months has prompted a retreat among bears as market returns and economic data continue to challenge expectations.
The S&P 500 on Tuesday received its most bullish outlook from Oppenheimer Asset Management, which predicts further strength in stocks as the Federal Reserve nears a pivot and the US economy stays resilient. Chief Investment Strategist John Stoltzfus raised his year-end price target on the index to 4,900, leaving room for a near 7% advance through the end of the year, the most bullish among Wall Street strategists tracked by Bloomberg.
The S&P 500 would end the year about 28% higher at a record if his forecast materialises, the best performance since 2019.
“A broadening of the rally across S&P 500 sectors suggests that the bull market that emerged from the October 2022 lows has legs to run higher into 2024,” Stoltzfus said. In other individual stock moves, HSBC Holdings Plc provided one of the bright spots in Tuesday’s company results, rising after the bank announced a new share repurchase programme and earnings that outpaced estimates.
BP Plc rose as its dividend and buyback outweighed disappointing profit.
Treasury 10-year yields traded near 3.96% while a gauge of dollar strength climbed by about 0.3%. The Australian dollar declined against the greenback after the nation’s central bank unexpectedly held interest rates unchanged and traders pared bets on further tightening.
In China, home sales plunged by the most in a year last month, underscoring why policymakers need to address faltering demand and a liquidity crunch in the sector. Caixin PMI figures showed factory activity contracted in July, missing economists’ estimates for a small expansion.
The yen traded weaker against the dollar, adding to Monday’s decline, amid sluggish demand at a 10-year bond auction. While investors had earlier anticipated that the Bank of Japan is moving toward letting yields rise after a tweak to its yield-curve control policy, it bought bonds to anchor rates.