U.S. Investors Look Beyond Rate Uncertainty and Shift Focus to Earnings

Barry Adams
06 Feb, 2024
New York City

Benchmark indexes on Wall Street traded around the flatline after falling in the previous session due to rate uncertainty.

Investors have begun shifting their attention to broader economic development and corporate earnings after months of rate uncertainty and confusing messaging from the U.S. Federal Reserve.

The U.S. economy has added about 5 million jobs over the last two years, when interest rates were hiked from 0.25% to 5.5%, surprising most economists and policymakers.

The U.S. economy has proven to be more resilient, and the labor market has expanded payrolls, contrary to predictions of an economic slowdown or a recession.

Moreover, inflation has fallen from a high of 9% to close to 3% over the last year, but still above the Fed's target of 2.0%, which may be harder to achieve.

Most of the decline in inflation is driven by the sharp fall in energy prices and the easing of pandemic-era supply chain disruption, both of which are not impacted by the Fed's monetary policy.

The Federal Reserve may have a harder time bringing down inflation to 2.0% over the next year if energy prices rebound because of the ongoing tensions in the Middle East and resurgent home prices if mortgage rates ease.

 

U.S. indexes and yields

The S&P 500 index decreased 0.03% to 4,939.07, and the Nasdaq Composite fell 0.02% to 15,431.14.

The yield on 2-year Treasury notes increased to 4.46%. 10-year Treasury notes declined to 4.16%, and 30-year Treasury bonds edged down to 4.34%.

WTI crude oil increased $0.50 to $73.30 a barrel, and natural gas prices decreased 1 cent to $2.06 a thermal unit.

Gold decreased by $1.55 to $2,026.22 an ounce and extended the previous week's gains after the U.S. dollar rebounded in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.51.

 

U.S. Stock Movers

Palantir Technologies surged 15.8% to $19.38 after the company reported a jump in its commercial customers.

Revenue in the fourth quarter jumped 20% to $608.4 million from $508.6 million, net income soared to $93.4 million from $30.9 million, and diluted earnings per share advanced to 4 cents from 1 cent.

The company said demand for its AI-driven and large language-based platform is "unrelenting."

The company also said the number of commercial customers increased by 55% to 221 from 143 a year ago.

The company forecasted first-quarter revenue between $612 million and $618 million and full-year revenue between $2.65 billion and $2.67 billion.

Chegg declined 7.5% to $8.60 after the online textbook platform operator estimated lower-than-expected revenue in the first quarter.

Revenue in the fourth quarter declined 8% to $188 million from $205.2 million, net income rebounded to $9.6 million from $1.9 million, and diluted earnings per share rose to 9 cents from 1 cent a year ago.

The company estimated revenue in the first quarter to range between $173 million and $175 million, gross margin between 73% and 74%, and adjusted operating earnings between $43 million and $45 million.

NXP Semiconductors rose 3% to $227.60 after the advanced semiconductor chip maker reported better-than-expected quarterly results.

Revenue in the fourth quarter increased 3% to $3.4 billion from $3.3 billion, net income declined to $703 million from $734 million, and diluted earnings per share dropped to $2.68 from $2.76 a year ago.

Revenue in the full-year increased 1% to $13.3 billion from $13.2 billion, net income was unchanged at $2.8 billion, and diluted earnings per share edged up to $10.70 from $10.55 a year ago.