AI mania drives Wall Street to higher close ahead of earnings
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[July 26, 2023] By
Carolina Mandl and Bansari Mayur Kamdar
(Reuters) - The tech-heavy Nasdaq closed higher on Tuesday, leading
gains on Wall Street amid investor excitement about artificial
intelligence before earnings reports from megacap technology companies
Alphabet and Microsoft after the bell.
Both Microsoft and Alphabet have launched an array of AI products since
OpenAI, backed by Microsoft, released ChatGPT in late 2022. Investors
expect the new products will help tech giants offset a slowdown in their
cloud businesses.
Shares in the owner of Google and the maker of Windows climbed 0.6% and
1.7%, respectively. "When you have this much enthusiasm for a specific
investing theme, you don't need much of a reason for markets to move.
It's inertia," said Steve Sosnick, chief strategist at Interactive
Brokers.
With the U.S. central bank on track for another 25-basis point interest
rate hike on Wednesday, policymakers face a choice over how much weight
to put on recent economic data.
"The Federal Reserve meeting tomorrow is reminding the market that it
will be the second to last, if not the last, interest rate increase, and
that has been a major concern for markets, particularly for tech
stocks," said Rishi Sadarangani, chief investment officer at hedge fund
R/Evolution Gate.
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A survey showed consumer confidence increased to a two-year high in
July, amid continued optimism about the labor market despite worries
about a recession.
The tech-heavy Nasdaq Composite index has rallied this year, helped by
outsized gains in rate-sensitive megacap growth companies and hopes for
an end to the U.S. Federal Reserve's tightening cycle.
Companies outside tech are also performing well as lower valuations
attract investors.
The blue-chip Dow inched up for 13th day in a row, even as a 0.87% slide
in Boeing capped gains.
RTX tumbled 10.2% after saying many of its Pratt & Whitney GTF engines
that power Airbus A320neo jets will need "accelerated removals and
inspections".
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., July 19, 2023.
REUTERS/Brendan McDermid/File Photo
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The S&P composite 1500 passenger airlines sub index dropped 3.45%,
bogged down by a 9.7% fall in Alaska Air after the airline's annual
revenue growth outlook missed expectations.
The Dow Jones Industrial Average rose 26.83 points, or 0.08%, to
35,438.07, the S&P 500 gained 12.82 points, or 0.28%, to 4,567.46
and the Nasdaq Composite added 85.69 points, or 0.61%, to 14,144.56.
Volume on U.S. exchanges was 9.75 billion shares, compared with the
10.32 billion average for the full session over the last 20 trading
days.
Most of the 11 major S&P 500 sectors were subdued. But materials
stocks gained 1.76%, tracking rising metal prices as investors
cheered pledges of support from a politburo meeting in China.
[MET/L]
General Electric jumped 6.27% after raising its annual adjusted
profit forecast, while General Motors slumped 3.51% after it posted
a decline in adjusted pre-tax profit and margins in its key North
American market from the previous quarter.
3M Co rose 5.33% as the industrial conglomerate raised its annual
adjusted profit forecast.
The S&P 500 earnings are now expected to decline 7.7% for the second
quarter, as per Refinitiv data.
Advancing issues outnumbered declining ones on the NYSE by a
1.19-to-1 ratio; on Nasdaq, a 1.21-to-1 ratio favored decliners.
The S&P 500 posted 37 new 52-week highs and no new lows; the Nasdaq
Composite recorded 74 new highs and 101 new lows.
(Reporting by Carolina Mandl, in Sao Paulo, Bansari Mayur Kamdar and
Johann M Cherian in Bengaluru; Editing by Shinjini Ganguli, Shounak
Dasgupta and Cynthia Osterman)
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