U.S. stocks trade higher with Microsoft and Alphabet earnings ahead

What’s driving markets

The Dow may break a four-day losing streak with help from earnings reports.

Coca-Cola
KO,
+2.88%,
General Electric
GE,
+6.50%,
3M
MMM,
+5.25%
and General Motors
GM,
-2.26%
were among the companies releasing results before the opening bell. After the close, Microsoft
MSFT,
+0.37%,
Alphabet
GOOGL,
+1.69%,
Visa
V,
+1.35%
and Texas Instruments
TXN,
+0.41%
will release their earnings.

About 30% of S&P 500 companies are slated to report this week, with the earnings season so far been better than Wall Street expected. About 23% of S&P 500 companies have already reported earnings, and 77% of them have posted earnings surpassing analysts’ expectations, according to FactSet.

“It’s all about earnings,” in Tuesday’s trading day, said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management. What’s especially reassuring for investors is what companies are — and are not — saying in their forward guidance, he noted. “We’re not reading about inflation killing margins. The forward-looking statements aren’t like ‘this is it and tomorrow is going to be bad,” Engelke said.

Louis Navellier, chairman and founder of Navellier & Associates, said Tuesday that “if the rest of the earnings season goes as well as early announcements have gone, especially by consumer-facing companies, we will be well positioned for a decent Christmas rally going into year-end.”

Read also: Alphabet earnings: What to expect from the Google parent

Meanwhile, in U.S. economic data the S&P flash U.S. services-sector index increased to 50.9, up from 50.1, to a three-month high. The S&P U.S. manufacturing-sector index reached 50, up from 49.8 or a six month high. Numbers above 50 signal expansion in a sector.

See: U.S. economy gets off to good start in the fourth quarter, S&P finds, as inflation cools

“Sentiment has improved in part due to hopes of interest rates having peaked, something which looks increasingly likely given the further cooling of inflationary pressures,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Investors remain wary of the Treasury market though.

The 10-year Treasury yield
BX:TMUBMUSD10Y
fell another 1.2 basis points to 4.835% on Tuesday, following its Monday decline.

“Supply demand imbalances have everyone focused on how demand is holding up from these Treasury auctions,” said Edward Moya, Senior Market Analyst at Oanda. “Next week’s Treasury refunding announcement could be important as they could reduce auctions at the long end of the curve as they are concerned about the recent moves with yields. “

Reviving an equity rally may require not just further declines in yields but also additional support from the ongoing third quarter corporate earnings reporting season analysts said.

“Overall, I suspect that a bottoming in both equities and Treasuries will be a process this week, and the fact that 1/3 of the S&P 500 reports earnings this week might help to aid in stabilization,” said Mark Newton, head of technical strategy at Fundstrat.

Companies in focus

• General Motors Co.
  GM,
  -2.26%
  shares are 2.3% lower. The car maker blew past earnings estimates for the third quarter. Meanwhile, the United Auto Workers announced it was expanding a strike to include GM’s truck plant in Arlington, Texas.

• General Electric Co.
  GE,
  +6.50%
  rose 7.2% Tuesday, after the company posted better-than-expected third-quarter earnings and raised its guidance. 

• Coca-Cola Co. 
  KO,
  +2.88%
  climbed 3.1% Tuesday, after the beverage giant beat third-quarter profit expectations and provided an upbeat outlook, as unit case volume returned to growth. 

• Verizon Communications Inc.
  VZ,
  +9.27%
  upped its free-cash-flow expectations for the year, and shares of the telecommunications company were headed about 8.6% higher in Tuesday’s trading.

• Halliburton Co. 
  HAL,
  -3.41%
  slipped 2.6% toward a three-day losing streak Tuesday, after the oil services company topped third-quarter profit expectations but came up a bit short on revenue, amid weakness in North America.

• 3M Co. 
  MMM,
  +5.25%
  bounced 5.6% Tuesday, after the consumer, industrial and health care-products company swung to a third-quarter loss due to $4.2 billion settlement of Combat Arms earplugs litigation, but reported adjusted profit that was well above expectations and raised its full-year outlook. 

— Jamie Chisholm contributed.