S&P 500 and Nasdaq rise in stock market’s busiest earnings day, but Dow dragged lower by 3M

S&P 500 and Nasdaq rise in stock market’s busiest earnings day, but Dow dragged lower by 3M

4 Dow components and nearly 10% of the S&P 500 will report earnings Thursday

U.S. stock benchmarks late-morning Thursday were gaining traction higher, though the Dow was being pinned lower by a tumble in 3M, amid a flurry of corporate quarterly results rolling out on Wall Street.

How are major indexes faring?

The Dow Jones Industrial Average DJIA, -0.23% fell 35 points, or 0.1%, at 26,799, after an initial burst higher at the open, with a decline shares of Post-it maker 3M, weighing on the index. The S&P 500 index SPX, +0.07%, meanwhile, was up 5 points, or 0.2%, at 3,009, not far from its July 26 closing record at 3,025.86, while the Nasdaq Composite Index COMP, +0.62% added 52 points, or 0.6%, at 8,171.

On Wednesday, the Dow rose 45.85 points, or 0.2%, to finish at 26,833.95, while the S&P 500 index added 8.53 points to reach 3,004.52 a gain of 0.3%. The Nasdaq Composite Index COMP, +0.62% advanced 15.50 points, or 0.2%, closing at 8,119.79.

What’s driving the market?

Markets gave up some initial gains but were making a midday comeback on Thursdasy as investors digested a wave of data and quarterly reports from some of America’s largest companies.

A quartet of Dow components and 45 of the S&P 500 index components were set to deliver their latest quarterly update, in what is the busiest day of the corporate earnings cycle. Investors had been somewhat sanguine after better-than-feared results from Tesla Inc., Microsoft and a number of other high-profile companies, but indexes have pulled back as they approach all-time records.

Doug Cote, chief market strategist at Voya Investment Management, said he remains bullish on the market overall, and said skittish investors haven’t been properly paying attention to positive signs in the economy.

“There is way too much pessimism in the market,” he said. The market is focused on the headlines and really ignores the strong fundamentals underneath,” he added, referring to healthy gross domestic product in the U.S. and employment figures, in addition to corporate earnings that have come in better than expected.

Of the 168 S&P 500 companies that have reported third-quarter results thus far, 80.4% of them have come in above analysts’ consensus estimates and 13.1% have fallen below estimates. By comparison, on average 65% of companies beat estimates and 20% miss, going back to 1994, according to data from Refinitiv.

U.S. economic reports, however, were mixed on Thursday, with durable-goods orders dropping 1.1% last month, the government said Thursday. Economists surveyed by MarketWatch had forecast a 0.8% decline. The decline over the past 12 months steepened to 5.4%, marking the biggest yearly drop-off since the middle of 2016. And sales of newly constructed homes in the U.S. decreased 0.7% on a monthly basis in September to a seasonally-adjusted annual rate of 701,000, the government reported Wednesday.

Meanwhile, U.S. initial jobless claims, a rough way to measure layoffs, fell by 6,000 to 212,000 in the seven days ended Oct. 19, holding near a 50-year low.

Investors, however, paid some attention to the final statements from European Central Bank President Mario Draghi, who delivered his final policy meeting in his tenure. His successor Christine Lagarde, the former International Monetary Fund chief, was in attendance at the policy meeting, Draghi confirmed at a news conference.

Draghi leaves Lagarde a fractious ECB that saw divisions over monetary easing measures embarked upon last month, including a recent spate of bond buying. European Central Bank left its main deposit facility rate at negative 0.5% and its main lending rate at 0%. The rate-setting Governing Council repeated that it expects to keep rates at “present or lower levels” until inflation, which has remained stubbornly low, “robustly” converges with its target of near but just below 2%. It also reiterated that it will begin a controversial bond-buying program at a pace of €20 billion a month beginning in November.

The ECB meeting comes ahead of the Federal Reserve’s two-day Oct. 29-30 policy meeting, where market participants are widely expecting a third consecutive interest rate cut of 25 basis points, as the central bank attempts to avert a slowdown that has gripped much of the developed world.

Outside of the U.S., the German economy, the largest in the European Union, is continuing to struggle, new data released Thursday show, with the difficulties of its export-oriented base extending to the service sector as global trade dries up.

The IHS Markit flash German manufacturing PMI inched up to 41.9 in October from September’s decade-worst 41.7, which is still a reading that shows the factory segment of the country’s economy in dire straits. Readings below 50 indicate contraction.

Which stocks are in focus?

Tesla shares TSLA, +17.00% were rising 16% after the electric-car maker surprised investors by reporting a profit for the third quarter, allaying investors’ fears that it was prioritizing growth and production over profit.

Opinion: Tesla is profitable again. How long will it last this time?

Microsoft Corp. MSFT, +2.07% reported fiscal first-quarter profit of $10.7 billion, or $1.38 a share, on revenue of $33.1 billion, up from $1.14 a share on sales of $29.08 billion a year ago. Analysts on average expected earnings of $1.25 a share on revenue of $32.15 billion, according to FactSet. Shares of the technology giant were 1.6% higher.

3M Co. MMM, -4.41% said quarterly sales fell to $7.99 billion in its latest quarter from $8.15 billion a year earlier. Analysts had expected $8.17 billion of revenue in the quarter, according to FactSet. Shares were down 4.3%. The company also cut its full year earnings forecast.

Ford Motor Co. F, -6.89% fell 6.5% after the car maker lowered its full-year target, sparking worries that a broad restructuring at the company isn’t succeeding in driving earnings growth.

Twitter Inc. TWTR, -19.48% shares are plunging 19% after the social-media company fell short on its third-quarter financial metrics despite delivering better user growth than expected.

PayPal Holdings Inc. PYPL, +8.04% rose 7.5% after the payments company posted better-than-expected results in its latest quarter with a 19% rise in revenues

Materials science company Dow DOW, +1.38% said third-quarter net profit dropped to $333 million, or 45 cents a share, from $1.01 billion, or $1.36 a share. Sales fell 15% to $10.76 billion, on lower prices as global energy prices fell. Shares of Dow gained 2%.

Ebay EBAY, -8.72% dropped 8.3% after the online marketplace forecast its first quarterly revenue decline in four years.

Visteon Corp. shares VC, +17.50% rallied 12% Thursday, after the maker of plane and car parts blew past estimates for the third quarter.

Baxter International Inc. BAX, -9.18% shares sunk 7.3% after the Deerfield, Ill., seller of dialysis products and generic pharmaceutical drugs disclosed errors in its financial statements related to foreign-currency transactions, which may force the company to restate results.

Raytheon Co. RTN, +3.73%, which is preparing to combine with United Technologies Inc. UTX, +1.43%, said Thursday it had net income of $860 million, or $3.08 a share, in the third quarter, up from $644 million, or $2.25 a share, in the year-earlier period. EPS from continuing operations also came to $3.08, ahead of the $2.86 FactSet consensus for the aerospace and defense contractor. Shares gained 2.8%.

How are other markets performing?

The 10-year Treasury note yield TMUBMUSD10Y, -1.39% was 2.2 basis points lower at 1.739% on Thursday.

On the oil front, December West Texas Intermediate crude CLZ19, +0.57% was modestly higher at $56.08 a barrel on the New York Mercantile Exchange, down 0.6%, after rising on Wednesday.

Gold for December delivery on Comex GCZ19, +0.58% gained 0.4% at $1,501.20 an ounce on Comex after rising 0.6% on Wednesday.

The ICE U.S. Dollar Index DXY, +0.20%, which tracks the performance of the greenback against six major rivals, gained 0.2% at 97.496.

Elsewhere, the Stoxx Europe 600 SXXP, +0.59% rose 0.5% at 97.729.

In Asia, China’s CSI 300 index 000300, -0.01% fell less than 0.1% to 3,870.67 and the Shanghai Composite Index SHCOMP, -0.02% was virtually flat to close at 2,940.92, while Hong Kong’s Hang Seng Index HSI, +0.87% jumped 0.9% to reach 26,797.95, more than erasing its decline from the previous session. Japan’s Nikkei 225 NIK, +0.55% rose 0.5% to 22,750.60.

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