Volatility gripped US stocks as investors contended with losses from big tech firms after a batch of lackluster earnings underscored how the US rate hikes are impacting the economy.
The S&P 500 rose after fluctuating, lifted by gains in healthcare stocks. The tech-heavy Nasdaq 100 pared losses.
Sentiment remains cautious as investors parse earnings. While Microsoft plunged after its earnings highlighted the impact of the surging dollar, Google parent Alphabet also fell after missing estimates. Amazon and Apple are among major companies still reporting this week.
Stocks had been buoyed in recent days by mostly solid earnings and speculation the US Federal Reserve may curb the pace of rate increases.
About a quarter of S&P 500 companies have reported third-quarter results, with more than two-thirds beating analysts’ estimates despite the big-tech setback. But investors are still concerned that slowing output will dent corporate profits in coming months.
“What I think tech is highlighting right now is in some ways a canary in the coal mine for the broader markets,” Erin Browne, a portfolio manager at Pacific Investment Management, said on Bloomberg Television.
“That’s seeping through from the consumer side over into the industrial side,” he said.
Sales of new US homes fell in September, another indication that the economy is starting to see the effects of the Fed raising rates sharply.
Technology powerhouse Alphabet thrilled investors during the bull market by consistently reporting stronger-than-expected sales and earnings. Those days are over.
Disappointing quarterly updates from the Google parent, as well as Microsoft and semiconductor giant Texas Instruments, triggered a selloff.
The news is foiling bets that this year’s $5.5 trillion selloff in tech stocks had reached bottom.
The quarterly updates underscore growing pressure on everything from corporate IT budgets to digital ad spending and chips for industrial machinery.
“The global economy is at a tipping point,” said Jessica Amir, strategist at Saxo Capital Markets.
“The stronger dollar will continue to hurt businesses’ forward earnings, at a time when consumer demand is likely to fall with the reverse wealth effect expected to grip markets. Pressure remains on riskier asset classes such as tech,” she said.
Alphabet now has reported three straight quarters of disappointing earnings per share, according to data compiled by Bloomberg, the longest such streak in seven years.
Signs of weakness were widespread in the results. Microsoft posted its weakest quarterly sales growth in five years, throttled by the surging dollar, slumping PC demand and faltering advertising revenue.
Microsoft’s forecast points to a serious slowdown, said Anurag Rana, an analyst at Bloomberg Intelligence.
“This guidance is worse than we had anticipated and shows that enterprise IT spending is decelerating at a faster pace amid rising economic woes,” the analyst said.
.