S&P 500 closes slightly red as weak business outlook fuels recession fears

NEW YORK, Jan. 25 (Reuters) – The S&P 500 ended nominally lower on Wednesday as a streak of corporate earnings ranged from dismal to dismal, reigniting concerns about the economic impact of the US Federal Reserve’s restrictive policies.

All three major US stock indices pared their losses during the afternoon to close out the lows of the session on a high note, with the blue-chip Dow posting small gains in the closing minutes.

The tech-laden Nasdaq was under pressure after Microsoft Corp. (MSFT.O), the first major tech company to post quarterly results, offered strict guidance and raised red flags regarding its megacap peers that have yet to report.

“We’ve had days of ups and downs, which indicates a constant tug-of-war,” said Chuck Carlson, CEO of Horizon Investment Services in Hammond, Indiana. “The gloomy good news from the standpoint of what the Fed is doing is working.”

“That result somehow became the catalyst for the market,” Carlson added. “Revenue is important, but what really concerns the markets is the Fed rate/inflation story.”

The fourth-quarter earnings season has gained momentum as 95 of the companies in the S&P 500 have reported. Of those, 67% have beaten consensus estimates, well below the average strike rate of 76% over the past four quarters, according to Refintiv.

Analysts now see total S&P 500 earnings down 3.0% year over year, nearly double the 1.6% drop on Jan. 1, according to Refinitiv.

The Dow Jones Industrial Average (.DJI) rose 9.88 points, or 0.03%, to 33,743.84, the S&P 500 (.SPX) lost 0.73 points, or 0.02%, to 4,016.22 and the Nasdaq Composite (.IXIC) fell 20.92 points, or 0.18%, to 11,313.36.

Five of the S&P 500’s 11 major sectors ended lower, with utilities (.SPLRCU) taking the largest percentage loss.

Abbott Laboratories (ABT.N) fell 1.4% as disappointing medical device sales weighed on shares.

Among the winners, News Corp (NWSA.O) rose 5.7% after Rupert Murdoch withdrew a proposal to reunite News Corp and Fox Corp.

AT&T Inc (TN) also delivered disappointing expectations, but the renewed focus on its telecom business helped boost subscriber numbers, sending its shares up 6.6%.

General Dynamics Corp. (GD.N) beat quarterly expectations, but a weak forecast for 2023 caused shares of the defense contractor to fall 3.6%.

Shares of Tesla Inc (TSLA.O) are whipping in extended trading after the electric car maker beat its fourth-quarter revenue estimates.

IBM (IBM.N) moved ahead after closing hours after posting the highest annual revenue growth in a decade.

Shares of Levi Strauss & Co rose more than 6% in extended trading after the jeans maker gave optimistic outlook for 2023.

Finally, in a postscript following Tuesday’s technical glitch that halted opening auctions for a series of stocks and prompted a review by the U.S. Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE) said a manual error resulted in the snafu causing great confusion at the opening bell.

Emerging issues outnumbered declining issues on the NYSE by a ratio of 1.25 to 1; on Nasdaq, a ratio of 1.13 to 1 was in favor of progress.

The S&P 500 recorded 8 new highs in 52 weeks and 1 new low; the Nasdaq Composite recorded 61 new highs and 30 new lows.

US stock market volume was 10.89 billion shares, compared to the 10.78 billion average over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru; Edited by Aurora Ellis

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