Still, Microsoft shares rallied following upbeat quarterly earnings and sales, including of robust artificial intelligence products. Its results boosted shares in companies such as cloud computing rival Amazon.com Inc , data analytics company Datadog and data cloud giant Snowflake Inc . Alphabet Inc reported better-than-expected first-quarter results and a $70-billion share buyback plan. "The market is looking for direction on where the economy and companies are headed. We've had some good earnings reports come out but investors are realizing its not sufficient to clarify the path forward," said Lisa Erickson, head of public markets at U.S. Bank Wealth Management in Minneapolis. Investors are waiting for more earnings reports and a key inflation reading on Friday as well as the Federal Reserve meeting next week, Erickson said. According to preliminary data, the S&P 500 lost 15.40 points, or 0.39%, to end at 4,056.23 points, while Nasdaq Composite index was up 0.47% at 11,854.83, according to the latest information on Nasdaq.com. The Dow Jones Industrial Average fell 230.54 points, or 0.69%, to 33,305.46. However, the economically sensitive Dow Transports average tumbled for a second straight day after Wednesday's weaker-than-expected capital goods data and Tuesday's weak United Parcel Service results. New orders for key U.S.-manufactured capital goods fell more than expected in March and shipments declined, suggesting that business spending on equipment likely remained a drag on first-quarter economic growth.
Still, earnings forecasts looked way more optimistic after Tuesday evening's bullish reports, with analysts now expecting a 3.2% contraction in first-quarter profit for S&P 500 companies compared with expectations for a 3.9% decline just a day ago.
Of the 163 S&P 500 companies that reported first-quarter profit through Wednesday, 79.8% topped analysts' expectations, as per Refinitiv IBES data. In a typical quarter, 66% companies beat estimates. "There had been a greater concern that the economy was going to slow down to a more significant extent and so far first-quarter earnings are bucking that trend and looking much stronger than anticipated," said Greg Bassuk, chief executive at AXS Investments. However, regional lender First Republic Bank's shares sank, hitting a fresh record low for the second day in a row, after a report that the U.S. government was unwilling to engineer its rescue, after the lender reported plunging deposits earlier this week. U.S. bank regulators were weighing the prospect of downgrading their private assessments of First Republic, which could curb its borrowing from the Fed, Bloomberg News reported on Wednesday afternoon. Shares of PacWest Bancorp , another regional bank, rallied as it beat estimates for first-quarter profit and stabilized deposit outflows. Meta Platforms Inc is scheduled to report results after the market close.
Investors are awaiting the Fed's monetary policy decision on
May 3 for clues on policymakers' next steps regarding interest
rates.
Traders have priced in a 79% chance of the U.S. central bank
hiking rates by 25 basis points next week, as per CMEGroup's
Fedwatch tool, with most expecting the Fed to hold rates before
starting to cut them later this year.
Reflecting mounting anxiety among investors, the cost of
insuring exposure to U.S. sovereign debt rose to its highest
since 2011, driven up by unease that the government could hit
its debt ceiling sooner than expected.
Activision Blizzard tumbled after UK's competition
regulator prevented its takeover by Microsoft on antitrust
concerns.
(Reporting by Sinéad Carew in New York, Sruthi Shankar and
Ankika Biswas in Bengaluru; Editing by Vinay Dwivedi and Richard
Chang)
