Ankika Biswas and Johan M. Cherian
(Reuters) – The Dow Jones Industrial Average and the S&P 500 edged higher on Tuesday, helped by financial stocks anticipating a major Federal Reserve policy decision this week and as investors held off on earnings reports from big technology companies.
Microsoft, widely known as a pioneer in artificial intelligence, is scheduled to report quarterly results after the market close. The company's shares rose 0.2%.
Other large stocks including Apple Inc, Amazon.com Inc, Meta and Alphabet Inc rose between 0.3% and 0.6%, but a 1.0% drop in Nvidia shares helped to limit movement on the tech-heavy Nasdaq.
As of 10:10 a.m. ET, the Dow Jones Industrial Average was up 139.83 points, or 0.34%, to 40,679.76, the S&P 500 was up 8.89 points, or 0.16%, to 5,472.43 and the Nasdaq Composite was down 4.29 points, or 0.02%, to 17,365.91.
Seven of the S&P 500's 11 sectors rose, with financial stocks up 1.2%. An index tracking banks also rose 1.5%.
Tesla's disappointing earnings, plus Alphabet's increased spending outlook, sparked a broad market sell-off last week, mostly in large-cap stocks.
The bar is set high for these highly valued tech giants, whose quarterly earnings will be scrutinized for signs that there's momentum to spark further AI-driven stock rallies.
“What we're interested to see is whether some of these companies continue to put money into adopting AI and building out their own AI universes, and whether investors continue to give them enough capital to do that,” said Scott Ladner, chief investment officer at Horizons Investments.
On the data front, ahead of Friday's nonfarm payrolls release, the Survey of Job Openings and Labor Turnover showed 8.18 million job openings in June, beating economists' expectations of 8 million.
Continued improvement in inflation and an easing job market have raised expectations that the Federal Reserve will announce its policy decision on Wednesday and signal a rate cut in September. According to CME's FedWatch tool, the probability of a 25 basis point rate cut is 89.6%.
Analysts fear that any hawkish comments could put a sharp damper on stock prices.
Expectations of interest rate cuts starting soon have investors fleeing the market-dominating technology sector into small and mid-cap stocks.
The small-cap index rose 0.8%, significantly outperforming the three major U.S. stock indexes in July, and the Dow Jones Industrial Average is on track to post its best month yet of 2024.
The consumer staples sector bucked the trend, dropping 1.1%, hurt by a 6.1% drop at Procter & Gamble Co. after it reported fourth-quarter sales that fell short of expectations.
Pharmaceutical company Merck fell 7.1% after cutting its full-year profit forecast, while CrowdStrike slid 7.5% after reports that Delta Air Lines had sought compensation from Microsoft and the company over a global cyber outage earlier this month.
Cybersecurity and cloud services company F5 saw its shares rise 11.2% after the company forecast better-than-expected fourth-quarter results.
Robot vendor Symbotic saw its shares fall 19.8% after current-quarter sales and adjusted core earnings fell short of expectations.
Advancing stocks outnumbered declining stocks on the NYSE by a 1.98-to-1 ratio, while on the Nasdaq, advancing stocks outnumbered declining stocks by a 1.32-to-1 ratio.
The S&P had 57 stocks hit new 52-week highs but no new lows, while the Nasdaq had 76 stocks hit new highs and 50 stocks hit new lows.
(Reporting by Ankika Biswas and Johan M. Cherian in Bengaluru; Editing by Pooja Desai)
