Stocks Decline on Fading Optimism for Iran Nuclear Accord and Disappointing Quarterly Earnings
U.S. Stocks Fall as Oil Prices Climb and Earnings Reports Disappoint
U.S. stocks declined in choppy trading on Thursday, April 23, as concerns about the war in Iran resurfaced and investors grappled with a mixed bag of earnings reports. The latest updates about the war in Iran, including Iran tightening control over the Strait of Hormuz and releasing footage of its commandos storming a huge cargo ship, weighed on equities. Additionally, oil prices shot higher after reports of air attacks in Iran, pushing stocks lower.
The Dow Jones Industrial Average fell 236.19 points, or 0.48%, to 49,253.84, while the S&P 500 lost 34.91 points, or 0.49%, to 7,102.99. The Nasdaq Composite lost 235.26 points, or 0.95%, to 24,422.31. Markets had rallied in recent weeks on hopes a resolution to the Iran war was on the horizon, along with expectations of solid corporate earnings. However, gains have been harder to come by this week, with the Nasdaq snapping a 13-session streak of gains on Monday.
Earnings Reports Disappoint
The earnings season has been largely strong so far, with 82.1% of the 123 companies that have reported earnings through Thursday morning topping analyst expectations, according to Tajinder Dhillon, head of earnings research at LSEG. The earnings growth rate of 15.6% is up from the 14.4% at the start of the month. However, the S&P 500 tech index was the worst performing of the 11 major S&P sectors, weighed down in part by a drop of about 8% in IBM after revenue growth slowed in the first quarter on weakness in its software business.
| Sector | Performance |
|---|---|
| S&P 500 Tech Index | -2.13% |
| S&P 500 Industrials Index | -0.64% |
| S&P 500 Materials Index | -0.43% |
| S&P 500 Energy Index | -1.31% |
| S&P 500 Financials Index | -0.45% |
| S&P 500 Consumer Discretionary Index | -0.83% |
| S&P 500 Consumer Staples Index | -0.33% |
| S&P 500 Health Care Index | -0.59% |
| S&P 500 Information Technology Index | -2.13% |
| S&P 500 Industrials Index | -0.64% |
| S&P 500 Utilities Index | -0.41% |
On the flip side, Texas Instruments surged 18.2% after forecasting second-quarter revenue and profit above Wall Street expectations. The company's strong guidance helped boost investor confidence in the technology sector.
Other Notable Earnings Reports
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Tesla shares fell 3.3% after the company raised its spending plan to more than $25 billion for the year. Car-rental company Avis Budget's shares slumped about 50% and were on course for their steepest two-day drop ever, after an eye-watering rally that was reminiscent of the "meme-stock" craze.
Data on Thursday showed weekly initial jobless claims increased only marginally last week, but risks from higher prices due to the war could hamper the economy. S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased this month after almost stagnating in March, but the improvement was largely due to what it said was "stock building in the face of concerns over supply availability and price hikes."
Investor Takeaway
Investors should be cautious of the market's reaction to mixed earnings reports and geopolitical tensions.
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