Stock Futures Rise, Goldman Report Earnings — and What Else Is Happening in the Stock Market Today

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A trader works on the floor of the New York Stock Exchange. (Michael Nagle/Bloomberg)

Stocks were mostly lower Thursday, as markets digested Wednesday’s rally and earnings reports from the major U.S. banks. Technology stocks were falling the most.

In midday trading, the Dow Jones Industrial Average rose 40 points, or 0.1%. The S&P 500 was down 0.6%, and the technology-heavy Nasdaq Composite was down 1.4%.

The market moves come after all three indexes jumped at least 1% Wednesday. Bond prices rose Wednesday, sending their yields lower after having run higher this year, as markets expect the Federal Reserve, trying to combat high inflation, to soon reduce its bondholdings.

But on Thursday, the 10-year Treasury yield was back on the rise, at 2.8% from a 2.7% close Wednesday.  If it closes at its current level, it would be a pandemic-era high.

That wasn’t helping tech stocks. Higher bond yields make future profits less valuable and many fast-growing tech are valued on the basis that they’ll churn out a chunk of their profits many years down in the future.

But the market’s focus is turning to bank earnings, which could give clues about the economy—especially since higher interest rates are meant to slow spending down. 

Wells Fargo (ticker: WFC) reported a profit of 88 cents a share, beating estimates of 81 cents a share, on revenue of $17.6 billion, below expectations for $17.8 billion. The bank said it expects an increase in reserves for credit losses, which is money it sets aside to absorb bad credits. The stock was falling 3.5%

This comes a day after JPMorgan Chase , (JPM) said it booked just over $900 million in reserves for credit losses

Citigroup (C), though, blew away earnings estimates. The bank reported a profit of $2.02 a share, beating estimates of $1.55 a share, on revenue of $19.2 billion, above expectations for $18.2 billion. The stock rose 1.5%. 

For now, the focus is on what banks are telling the market about the economy. Setting aside cash for credit losses is not exactly a positive. “Banks only do that when they think that default rates, which are currently low, will start to rise,” wrote Tom Essaye, founder of Sevens Report Research. 

Earnings reports across sectors are only beating expectations by a slim margin. With just over 5% of the S&P 500’s market capitalization having reported results, according to Credit Suisse, the aggregate EPS result on the index has exceeded estimates by 2.8%. Last quarter, results beat by more than 5%.

Investors will need to see companies do better than that. Stocks are still seen as expensive as they’ve risen to price levels that are relatively high compared to their expected earnings in the next year. Simply put, stocks prices are reflecting a big stream of profits ahead, so in order for more stock gains, companies need to beat earnings expectations by a lot more.

On the economic data front, retail sales rose 6.9% year-over-year in March. The month-over-month increase was 0.5%, just missing estimates of 0.6%. Earnings for retail and consumer companies will take center stage soon. 

Stocks in Asia rose Thursday on reports that said China would be easing monetary policy by cutting a key interest rate for the second time this year.

Here are six stocks on the move Thursday: 

Twitter (TWTR) stock initially rose, then dipped 0.7% after Tesla CEO Elon Musk offered to buy the social media company for $54.20 a share.

Taiwan Semiconductor Manufacturing  (TSM) beat first-quarter earnings and sales estimates on continued demand for chips in everything from advanced computing to cars. The strong sales are expected to continue into the second quarter. U.S.-listed shares of TSMC slipped 2.4%.

Goldman Sachs Group (GS) stock fell 0.5% after the company reported a profit of $10.76 a share, beating estimates of $8.89 a share, on revenue of $12.9 billion, above expectations for $11.8 billion. 

Morgan Stanley (MS) stock gained 1.2% after the company reported a profit of $2.02 a share, beating estimates of $1.75 a share, on revenue of $14.8 billion, above expectations for $14.3 billion. 

UnitedHealth Group (UNH) stock rose 0.5% after reporting a profit of $5.49 a share, beating estimates of $5.36 a share, on revenue of $80.2 billion, above expectations for $78.7 billion. 

International Business Machines (IBM) stock gained 1.1% after getting upgraded to Overweight from Equal Weight at Morgan Stanley. 

Write to Joe Woelfel at joseph.woelfel@barrons.com and Jacob Sonenshine at jacob.sonenshine@barrons.com