The first quarter of US stock market earnings season ended with mixed financial results for most of the big companies, dampening expectations and failing to fuel a strong performance despite monetary tightening. In particular, the results from Netflix, which lost almost one million subscribers but only slightly less than two million expected, have weighed on the market. Nevertheless, per-share earnings exceeded analysts’ expectations and Netflix’s stock rose 5.6% after the market closed on Monday.
The Dow and S&P 500 both finished lower on Monday. While bank earnings fueled the market yesterday, reports about a slower growth rate from Apple were a drag on the market. The Dow Jones industrial average ended down 215 points, while the S&P 500 and Nasdaq were slightly lower. Still, the indexes appeared poised to build on Friday’s rally. Friday’s rally halted a five-day losing streak and lifted the Dow by over 650 points.
Although the markets have been under pressure this year, they are holding steady as more reports about spring profits flow in. While the S&P 500 climbed 2.8% Tuesday, 99% of stocks in the Nasdaq rose as well. Even the small-company sector soared, with the Russell 2000 index gaining 3.5%. Even a weaker dollar is good news for stocks, and a stronger U.S. economy is a necessary condition for the long term health of the market.
Despite the market’s weakness, investors are still confident that the United States economy will grow at a solid pace. While the Fed is aiming to stabilize inflation, it is still concerned about overshooting its goals and tip the economy into a recession. This has led investors to shift their money to international stocks, which are viewed as more stable and predictable investments than U.S. stocks. They also see extreme pessimism as a positive sign for contrarian investors.
Last week, a few big companies have announced earnings and guidance. Oracle beat expectations thanks to strong cloud revenue. Meanwhile, FedEx announced a big dividend hike and appointed three independent directors to its Board. Amid crypto market turmoil, Coinbase Inc. cut 18% of its workforce. Despite the mixed reports from companies, investors have been rewarded with strong trading volume in the past few days. And despite the latest news, China has been a linchpin in the market, and the U.S. dollar is set to extend its recent rally.
Natural gas and oil company earnings continue to be a key driver of the U.S. economy, benefiting millions of households across the country. Earnings from these companies allow these companies to invest in new technologies and production, which in turn supports millions of American jobs. However, some companies are reporting weak earnings, which makes the results even more impressive. However, some companies are reporting more than ten times the expected quarterly earnings.