Sarah Travers
U.S. markets are displaying a mix of movements as Wall Street approaches what could be its sixth consecutive winning week—the longest streak of the year. Investors are reacting to a variety of earnings reports, shifting oil prices, and changing expectations for the Federal Reserve’s next move on interest rates.
The S&P 500 climbed 0.1% in early trading Friday, nearing the all-time high it set earlier in the week. The Nasdaq Composite also rose 0.5%, while the Dow Jones Industrial Average fell 0.4% after hitting its own record on Thursday.
Earnings Impact Stock Performance
Several companies reported mixed earnings that triggered notable stock fluctuations. Netflix shares soared 8.6% after it reported higher-than-expected profits, despite experiencing slower subscriber growth in the last quarter. This surge helped balance out the 6.7% drop in CVS Health shares, which fell after the company revised its profit expectations below market forecasts. CVS also announced a leadership shift, with David Joyner stepping into the role of president and CEO, succeeding Karen Lynch.
American Express experienced a 4.8% decline in stock value despite reporting stronger profits than analysts anticipated. The company’s revenue missed forecasts, and it signaled that its 2024 revenue outlook would likely remain at the lower end of its previously forecasted range. Similarly, SLB, a leader in oil and gas services, saw its stock fall 1.7%. While SLB’s profits slightly exceeded estimates, its revenue fell short as international producers scaled back spending due to weaker oil prices.
Oil Prices and Market Sentiment
Crude oil prices have dropped throughout the week, driven by reduced geopolitical tensions and concerns about China’s economic slowdown. Fears that Israel might retaliate by attacking Iran’s oil infrastructure have eased, causing further price declines. Iran is a significant exporter of crude, especially to China, so any disruptions could have had a global impact.
Brent crude oil, the international benchmark, fell 1.2% on Friday, heading for a 6.9% weekly drop. After reaching nearly $81 last week, prices are now sitting below $74 per barrel, reflecting the weakened demand outlook and geopolitical calm.
Fed Expectations and Bond Market Movements
The bond market saw Treasury yields ease, with the 10-year Treasury yield dropping from 4.10% to 4.06%. The shift reflects changing expectations for the Federal Reserve’s upcoming interest rate decision. Investors now anticipate a 0.25% rate cut in November, scaling back earlier hopes of a larger 0.5% reduction. The current federal funds rate remains within a range of 4.75% to 5%.
Global Market Trends
Outside the U.S., Chinese stock markets displayed sharp swings, with the Shanghai index rising 2.9% and Hong Kong climbing 3.6%. Although China’s economy slowed during the summer, a potential economic stimulus package from the government and central bank is generating optimism. However, doubts remain over the long-term effectiveness of such measures, especially in light of challenges within the country’s real estate sector.
Meanwhile, stock indexes across Asia and Europe showed mixed results, reflecting a combination of uncertainty about global demand and positive signals from individual companies’ earnings reports.
Looking Ahead
As the S&P 500 inches closer to another record and heads toward its sixth winning week, investors remain cautiously optimistic about the economy’s trajectory. Solid economic data has reduced fears of a recession, giving hope that the U.S. might achieve a soft landing from high inflation. However, some analysts warn that stock valuations are becoming too high relative to corporate profits, signaling potential risks ahead.
Despite the caution, strong performances from companies like Netflix and Intuitive Surgical, which posted better-than-expected results, are keeping markets buoyant. With oil prices stabilizing and the Federal Reserve poised to take a more measured approach to interest rate cuts, investors will likely remain focused on upcoming earnings reports and global developments to guide the market’s next move.
