Market Snapshot: U.S. stocks struggle for direction with earnings, interest rates in focus

What’s driving markets

U.S. stocks wavered in choppy trades Tuesday afternoon, as the market readies for the still young earnings season to kick into high gear.

Companies presenting their earnings on Tuesday include Bank of America Corp. BAC, +0.56%, Goldman Sachs Group Inc. GS, -1.51%, Bank of New York Mellon Corp. BK, +0.54%, Johnson & Johnson JNJ, -2.46%, and Lockheed Martin Corp. LMT, +2.79%. After the closing bell, Netflix Inc. NFLX, +0.53% will release its results.

Results so far have been generally well-received, though declines for Goldman and Johnson & Johnson weighed down the Dow.

“If earnings continue to impress, too much of a good thing will ultimately prove to be inflationary and that will likely mean more Fed tightening,” according to Edward Moya, senior market analyst at OANDA.

While investors gauged earnings results, Atlanta Fed President Raphael Bostic spoke on CNBC Tuesday morning, discussing the need for “one more move,” then to hold steady, while taking a look to see how the economy is holding up under higher interest rates.

“It was really Bostic’s remarks that pushed us over into the red,” said Kimberly Forrest, founder and chief investment officer at Bokeh Capital Partners.

The premarket earnings generally gave enough for investors to smile about, but the central banker’s comments wiped away the grin. “Bostic is willing to stick it out in for the long haul,” said Forrest.

St. Louis Federal Reserve President James Bullard on Tuesday also reiterated his call for higher U.S. interest rates to combat inflation, in an interview with Reuters. Bullard, who isn’t currently on the Fed’s interest-rate setting committee, wants the Fed to raise rates to a range of 5.5% to 5.75%.

Those views could be at odds with market hopes for a retreat soon from higher interest rates, Forrest said.

Generally upbeat results have helped the S&P 500 to hold near the top of the 3,800 to 4,200 range it has occupied for about five months, as softer inflation data of late also reduced concerns about faster Fed rate increases.

“The S&P 500 is approaching the highest levels reached in February, as the market focus is shifting back to economic and corporate data,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Stronger-than-expected earnings could give a hand to equity bulls,” she added, while warning any upswing could falter if recent signs of U.S. economic resilience pushed yields back higher.

And data out of China on Tuesday suggested an important growth driver of the global economy was improving, with GDP up 4.5% in the first quarter, boosted by increased consumption and retail sales, after authorities abruptly abandoned the stringent “zero-COVID” strategy.

Still, pessimism remains. Fund managers struck the most downbeat mood so far this year, according to a Bank of America fund manager survey. Growth expectations are softening, even as the polled managers predict global inflation and short-term rates will ebb lower.

In other data beyond corporate earnings, March housing starts showed a 0.8% decline after a revised 7.3% increase in February. U.S. building permits fell 8.8% in the month. The decline was linked to a slowdown in apartment building construction.

Companies in focus

• Bank of America BAC, +0.56% shares were off less than 0.1% Tuesday afternoon. The bank reported a beat on revenue and profit in its first quarter profits.
• Shares of Goldman Sachs GS, -1.51% were 1.2% lower as investors digest the bank’s results. Goldman’s first quarter revenue missed estimates, but net income beat expectations.
• Johnson & Johnson JNJ, -2.46% shares were down more than 2%. The consumer and pharmaceutical booked a multibillion charge to settle talc litigation claims — but the company also beat analyst estimates while lifting its quarterly dividend and raising it full-year guidance.
• Lockheed Martin LMT, +2.79% shares were up more than 2% higher after first quarter earnings results. The defense and aerospace company beat expectations on earnings and sales.

• Southwest Airlines Co. LUV, -0.77%’s stock was down 1.3% Tuesday afternoon. The Federal Aviation Administration earlier Tuesday said the carrier had paused departures of its flights across the U.S. The agency later updated its statement to the following: “Southwest Airlines pause on departures has been fully canceled. Earlier this morning, Southwest requested that FAA pause Southwest departures due to an internal technical issue at Southwest.” 

— Jamie Chisholm contributed to this article.