U.S. and European stocks fell slightly on Tuesday as investors weighed the latest wave of corporate earnings and business activity surveys for clues about the health of the global economy.
Wall Street’s benchmark, the S&P 500, ended the day down 0.1%. The tech-heavy Nasdaq Composite fell 0.3%.
The muted activity came after trading in dozens of blue-chip stocks was briefly halted following issues with the New York Stock Exchange’s opening auction.
The stock moves also ahead of Microsoft’s quarterly results, released after the closing bell, which came days after the tech giant announced plans to cut 10,000 jobs by the end of March and announced plans to cut 10,000 jobs by the end of March. confirmed that it would invest billions of dollars in bot maker ChatGPT OpenAI.
Aerospace and defense contractors Lockheed Martin and Raytheon were two of the US firms to report earlier in the day, with the former reporting year-on-year sales down but beating forecasts fourth quarter analyst earnings.
Healthcare products maker Johnson & Johnson on Tuesday predicted profits this year would beat estimates, even after sales fell more than 4% in the three months to December.
In European stock markets, the regional Stoxx 600 lost 0.2% and the German Dax lost 0.1%.
“Best feeling on [the] growth prospects” had helped the S&P 500 rise to its highest level since early December on Monday, according to JPMorgan analysts, with semiconductor and technology stocks in particular posting strong gains.
The US bank, however, does not expect January’s stock market rally to last. “The recent weakening of economic data and the anticipated drop in earnings forecasts and weak [full-year] forecasts point to markets likely to decline,” he said.
Others, however, are more optimistic. China’s economic reopening, diminishing recession fears in Europe and slowing inflation in the United States mean that “investor concerns about a harder landing for the global economy” have eased, it said. Lee Hardman, currency analyst at MUFG.
Traders have “new confidence that central banks can pause their rate hike cycles” this year, he added, even as officials from the US Federal Reserve and European Central Bank insist that their fight against inflation is far from over.
Private-sector output in the United States continued to decline in January, a business activity survey showed on Tuesday, with the composite purchasing managers’ index falling to 46.6 from 45 in December. Any number below 50 signifies a contraction rather than an expansion.
ABN Amro analysts said the figure supported its expectation of a “modest decline” in US gross domestic product this quarter.
Meanwhile, the euro zone “returned to growth” in early 2023, according to a flash PMI update released by S&P Global on Tuesday, as business activity in January rose after six straight months of decline.
The data “adds to the evidence that the region could escape recession,” said Chris Williamson, chief economist at S&P Global Market Intelligence.
Capital Economics’ chief economist for Europe, Andrew Kenningham, said the region’s PMI was consistent with a “roughly stagnant” economy, adding that “there’s nothing here” to prevent the ECB from raising rates by 1 percentage point over the next two months, “and maybe more beyond that.”
US government bond prices improved on Tuesday, with the yield on the benchmark 10-year Treasury falling 0.07 percentage points to 3.46%.
In Asian equity markets, the Hong Kong Hang Seng Index gained 1.8%. Japan’s Nikkei 225 gained 1.5%, after nearly recovering from a selloff triggered by the Bank of Japan’s surprise adjustment to its longstanding yield curve control measures in late December.
Prices for Brent crude, the international oil benchmark, fell 2.2% to just over $86 a barrel. Bank of America analysts expect Brent to hit $110 a barrel by this summer, boosted by rising Chinese demand.
