US stocks lose steam as earnings surge flows in

US stocks, which initially moved higher in early trading on Tuesday, wobbled later in the session 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) traded flat, while the tech-heavy Nasdaq Composite (^IXIC) dipped roughly 0.4%. The Dow Jones Industrial Average (^DJI), which initially opened flat, climbed about 0.2%.

A rally in stocks hit the buffers on Monday as the market took on Fed Chair Jerome Powell’s repeated warnings that the Federal Reserve will move cautiously on policy, disappointing those betting on early rate cuts.

With earnings season about halfway done, eyes are on whether Tuesday’s corporate results can help jump-start a return to gains for stocks.

In the early going, Spotify (SPOT) shares jumped after the music streamer’s strong guidance, while Eli Lilly’s (LLY) stock popped after the company’s 2024 profit forecast topped estimates. Ford (F) is expected to report after the market close.

Meanwhile, investors will also be digesting comments from Cleveland Fed president Loretta Mester, who said in a speech on Tuesday that “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%.”

Still, if the economy improves as expected, she believes the Fed “will gain that confidence later this year, and then we can begin moving rates down.”

Fed officials Patrick Harker, Susan Collins, and Neel Kashkari are also scheduled to speak later today.

Live5 updates

Tue, February 6, 2024 at 10:27 AM MST

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.”
Tue, February 6, 2024 at 9:58 AM MST

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%.
Tue, February 6, 2024 at 9:10 AM MST

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 CFO 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 can not 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.

Read more here.
Tue, February 6, 2024 at 8:40 AM MST

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.

Read more here.
Tue, February 6, 2024 at 7:33 AM MST

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.

The S&P 500 (^GSPC) rose about 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) edged up about 0.3%. The Dow Jones Industrial Average (^DJI) traded flat.