US stocks ended Tuesday's session in the green as the Dow Jones Industrial Average (^DJI) led gains, rising about 0.3%.
The moves come as investors digested comments from a handful of Fed officials on the possibility of interest rate cuts, along with a fresh batch of quarterly results.
In earnings, Ford (F) shares climbed above 6% in after-hours trading after the car maker provided 2024 adjusted Ebit guidance between $10 billion to $12 billion, above Wall Street estimates. Adjusted earnings and revenue also beat expectations.
But it wasn't so great for Snap (SNAP). Shares cratered 30% in after-hours trading after the company missed revenue estimates and guided to an adjusted EBITDA loss between $55 million to $95 million, which was wider than expected.
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A tale of two earnings: Ford and Snap
Two big movers after the bell: Ford and Snap.
Ford (F) shares climbed above 6% in after-hours trading after the carmaker provided 2024 adjusted EBIT guidance between $10 billion and $12 billion, above Wall Street estimates. Adjusted earnings and revenue also beat expectations.
But it wasn't so great for Snap (SNAP). Shares cratered 30% in after-hours trading after the company missed revenue estimates and guided to an adjusted EBITDA loss between $55 million an $95 million, which was wider than expected.
- Alexandra Canal
Stocks eke out gains to end trading day
US stocks eked out gains to close out Tuesday's trading session with the Dow Jones Industrial Average (^DJI) leading the charge.
The index ended the day up about 0.3%, or nearly 150 points, while the S&P 500 (^GSPC) climbed roughly 0.2%. The tech-heavy Nasdaq Composite (^IXIC), which erased earlier session losses heading into the close, traded above the flatline.
- Josh Schafer
S&P 500 earnings turn positive but there are some signs of weakness
With uncertainty about when the Fed will cut interest rates and concerns over the impact of the Federal Reserve holding interest rates at a 23-year high at times weighing on stocks to start to the year, earnings have produced an above-average beat, supporting recent moves higher in the stock market.
Through about two-thirds of the S&P 500's quarterly reports, companies are posting an average 6-percentage-point earnings per share beat this quarter, per Bank of America. That's about double the average 3% beat normally seen by S&P 500 companies.
Overall 70% of companies have reported beats, which is above the historical average of 63%. The S&P 500 (^GSPC) is on pace for earnings per share to grow 1.9% compared to the same quarter a year prior, per FactSet.
Bank of America US and Canada equity strategist Ohsung Kwon told Yahoo Finance that based on expectations, earnings thus far have been "good."
"The beat has been driven by margins, not necessarily sales," Kwon said. "I don't think anybody really expected sales to improve that much in Q4 ... Companies have cut costs, margins are improving, and companies are delivering."
Earnings haven't come without blemishes though. Mentions of weak demand remain "elevated," per BofA, and have played out in revenue numbers that are barely topping estimates. And companies that miss are seeing worse-than-normal reactions in their stock during the following trading days.
Companies that miss Wall Streets expectations for earnings and revenue are seeing their stocks fall 4.3% on average the next day, per BofA. This is well above the typical average drop of 2.4%.
"Overall market sentiment has improved a lot over the past two months or so," Kwon said. "Valuations are not cheap. And because of that, if you are missing [earnings estimates], then you're getting penalized more than before so the bar is pretty high."
- Dani Romero
Housing stocks retreat as March rate cut hopes are dashed
Housing stocks were losing steam on Tuesday as investors' hopes of Federal Reserve rate cuts starting next month have started to fade.
The builder will be reporting fourth quarter earnings later this month and Wall Street anticipates harsh winter weather served as a headwind for closing volumes during the quarter. Some analysts also see downside risks to the company's results given competitors reported positive demand and traffic trends last month.
Homebuilder stocks were among the best performers away from AI-related tech names in 2023 as investors bet lower interest rates in the year ahead and a lack of existing homes for sale helped margins for builders focused on selling new homes.
Fed Chair Jerome Powell on Sunday poured more cold water on expectations that lower interest rates were coming soon, reiterating in an interview with "60 Minutes" it is "not likely" the Fed will elect next month to begin its process of cutting interest rates.
The Fed's actions ripple through the housing market, where the average rate on a 30-year mortgage remains above 6.6%. Still, these rates are off the highs north of 7% seen last fall.
Asked Sunday about how Powell thinks about the challenges high mortgage rates have imposed on prospective homebuyers, the Fed chair said these costs are "all part of getting back to a place of price stability when interest rates can be low again on a sustainable basis."
- Alexandra Canal
Neel Kashkari: Fed 'not all the way there yet' on inflation fight
Minneapolis Fed President Neel Kashkari said recent inflation data has been surprisingly positive but that the Federal Reserve is "not all the way there yet" when it comes to tackling inflation.
While speaking at a Q&A hosted by the Greater Mankato Growth initiative in Minnesota, Kashkari said he has his "fingers crossed" the Fed is done raising interest rates; however, he doesn't want to say the central bank is completely done just yet.
That being said, the Fed official did say the three-month and six-month data is "basically there," despite the lag in year-over-year inflation.
Earlier on Tuesday, Cleveland Fed President Loretta Mester signaled the Fed can begin to move rates down "if the economy evolves as expected."
- Alexandra Canal
Stocks trending in afternoon trading
Here are some of the stocks trending on the Yahoo Finance ticker page:
Palantir (PLTR): The software company saw shares soar more than 25% on Tuesday after the company reported its first annual profit and touted more artificial intelligence advancements. Palantir cited its Artificial Intelligence Platform, or AIP, as a key catalyst to its future and issued full-year operating profit guidance that was above estimates.
Spotify Technology (SPOT): Shares jumped as much as 11% on Tuesday after the audio giant posted strong guidance and user growth in the fourth quarter. Despite missing Wall Street estimates on both the top and bottom lines, Spotify doubled down on its "efficiency" strategy as margins surged to 26.7%.
Toyota Motor Corporation (TM): The automaker raised its full-year profit forecast by nearly 9% after seeing strong sales of its hybrid vehicles in the US. The results buck the trends of competitors, which have cited lukewarm EV demand. Shares rose about 8%.
Docusign (DOCU): Shares fell 3% after the company announced a restructuring plan that will reduce its workforce by 6%, or about 400 employees. According to a regulatory filing, Docusign will incur restructuring charges of roughly $28 million to $32 million.
- Alexandra Canal
Loretta Mester: 'Mistake' to cut rates too soon
Cleveland Fed President Loretta Mester is weighing in on the rate cut debate.
In a speech at the the Ohio Bankers League economic summit in Columbus on Tuesday, Mester echoed Powell's previous rhetoric of the risks associated with cutting interest rates too soon.
"It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2%," she said. "Doing so would undermine all the good work that has gone into getting inflation to this point."
"On the other hand, if year-ahead inflation expectations continue to decline, maintaining the current level of the nominal fed funds rate for too long would effectively be a tightening in our policy stance, which would pose an increasing risk to the maximum employment part of our mandate," she warned.
Although year-over-year inflation has remained significantly above the Federal Reserve's 2% target, core inflation has come in below that 2% range on a six-month annualized basis.
Still, Jerome Powell shut down the possibility of a March rate cut at the central bank's meeting last month, saying that's "probably not the most likely case or what we'd call the base case."
Largely, markets expect the central bank will begin cutting rates at its May meeting, pricing in a roughly 66% chance. However, investors have trimmed their bets at of late. Just one week ago, markets were pricing in an 85% chance of a rate cut by the end of the Fed's May meeting.
"Risk management will be the hallmark of monetary policy decisions going forward," Mester said. "If the economy evolves as expected, I think we will gain that confidence later this year, and then we can begin moving rates down."
- Alexandra Canal
Stocks wobble in midday trading
US stocks lost steam by midday trading on Tuesday as investors continued to debate the possibility of interest rate cuts ahead of a fresh batch of quarterly results.
By midday trading, the S&P 500 (^GSPC) fell about 0.1%, while the tech-heavy Nasdaq Composite (^IXIC) dipped roughly 0.3%. The Dow Jones Industrial Average (^DJI), which initially opened flat, climbed about 0.1%.
- Josh Schafer
Palantir's AI push
Palantir (PLTR) stock soared more than 25% Tuesday morning as investors cheered the defense software maker's latest artificial intelligence advancements.
"I've never before seen the level of customer enthusiasm and demand that we are currently seeing from [artificial intelligence platforms] in US commercial," Palantir chief revenue officer Ryan Taylor told investors during the company's earnings call on Monday night.
The software company's Artificial Intelligence Platform, or AIP, was mentioned nearly 50 times throughout the call. And according to Palantir, it's a key reason it expects US commercial revenue to grow nearly 40% in 2024.
It's also the reason the stock surged more than 100% over the past year, as AI euphoria sent many tech stocks roaring. Amid calls that Denver-based Palantir's stock was already overvalued, Tuesday's market action is the latest sign that investors haven't had enough of the AI trade — even if Wall Street believes parts of the trade have extended beyond any fundamental backing.
"We are incredibly bullish on Palantir," Morningstar equity analyst Malik Ahmed Khan told Yahoo Finance Live. "If you look at our forecasts you would see us being above consensus on profitability, on revenue, etc."
"At the same time," he added, "we cannot rationalize Palantir's current valuation in the base case."
Jefferies equity analyst Brent Thill, who entered the earnings report with a Sell rating on Palantir, conceded in a research note after the release that the AIP growth is exceeding expectations. But even after upgrading the stock to a Hold rating, Thill still warned about the cost of the stock.
"The biggest concern is valuation with [the] stock trading at a 23% premium to the large cap average," Thill wrote.
- Alexandra Canal
Spotify jumps on strong guidance, user growth
Spotify Technology (SPOT) reported fiscal fourth quarter earnings on Tuesday that missed expectations. But strong guidance helped boost shares in early trading as the music-streaming platform continues to focus on profitability amid recent price hikes and changes to its podcasting strategy.
The company reported an operating loss of 75 million euros ($80.6 million) in the quarter amid severance and real estate-related charges. This was ahead of updated company guidance that Q4 operating losses would come in between 93 million euros and 108 million euros.
The audio giant also guided to a strong Q1 operating income of 180 million euros, well ahead of Wall Street consensus expectations. Spotify reported an operating loss of 231 million euros in the year-ago period.
On the earnings call, Spotify CEO Daniel Ek emphasized the company's recent "efficiency" strategy.
"The hurdle rate for any new type of investments will be much higher than what it has been," he said, adding Spotify will be more diligent and disciplined in shutting down previous processes that no longer serve this new mandate.
"That doesn't mean that the company is any danger of any kind," he said. "We're just simply thinking about, 'Are there better ways for us to do this?'"
The company also saw an uptick in subscriber growth, gross margins, free cash flow, and average revenue per user. Shares climbed as much as 11% shortly after the opening bell.
- Alexandra Canal
US stocks open mostly higher
US stocks opened mostly higher to kick off Tuesday's trading day as investors concentrate on a fresh batch of earnings and a handful of Fed speakers on tap.