Stocks were mostly down early Wednesday as a two-day rally spurred by a better-than-expected start to the earnings season lost momentum.
The S&P 500 (^GSPC) fell 0.2% after the index gained more than 4% on consecutive winning days, while the Dow Jones Industrial Average (^DJI) rose 60 points to 0 .2%. The tech-heavy Nasdaq Composite (^IXIC) lost 0.3%.
Netflix (NFLX) was in the limelight after a big revenue gain on Tuesday afternoon that included 2.41 million new subscribers – a key metric watched by analysts – more than double Wall Street’s estimate of a million additions. Executives noted in the income statement that the company is “on track to reaccelerate growth” after a difficult first half. Shares jumped 10% at the open.
Elsewhere on the earnings front, shares of United Airlines Holdings (UAL) rose nearly 5% on Wednesday morning after the airline reported stronger-than-expected third-quarter results due to strong travel demand. and a current-quarter earnings forecast that topped Wall Street estimates.
Strong reports from Netflix and United Airlines add to a batch of upbeat corporate results released earlier in the week from companies such as Goldman Sachs (GS) and Johnson & Johnson (JNJ).
Although the numbers so far are better than expected, of the companies that have reported third quarter results so far, only 69% have posted actual earnings per share above estimates – below the 5-year average. by 77%, according to FactSet Research. And among those who beat estimates, gains topped estimates by 0.1%, well below the 5-year average of 8.7%.
Many Wall Street strategists have pointed out that valuations have yet to fully reflect the decline in earnings that is consistent with the ongoing slowdown in economic growth, pointing to earnings forecasts that remain far too high.
“If, as we expect, third-quarter earnings disappoint and earnings guidance is trending lower, we could see yet another decline for equities,” said Gargi Chaudhuri, head of investment strategy. iShares at BlackRock in a note. “Don’t be fooled into chasing these bear market rallies.”
“The market will of course eventually bottom out, but until the Fed pivots or earnings are properly cut, we believe the time is not right yet,” Chaudhuri said.
In commodity markets, oil rose amid fears that new European sanctions against Russia could further squeeze supply. The Biden administration is expected to announce a plan on Wednesday to release 15 million barrels of U.S. strategic reserves to suppress gas prices. West Texas Intermediate (WTI) crude futures rose about 1.5% to trade around $84 a barrel.
Across the Atlantic, the UK extended its period of volatility as investors forecast double-digit inflation for September of 10.1%, questioning a recent emergency decision by the Bank of England to sell bonds. government bonds. The pound weakened and gilts fell.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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