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Not even blue-chip strength could lift the oldest of the three main U.S. equity indexes into the green on Tuesday, and technology dragged on the relative newcomers amid questions about the durability of the market’s major trend. A big earnings season is unfolding, the April Fed meeting is underway, and the bottleneck at the Strait of Hormuz is unresolved.
At the closing bell, the Dow Jones Industrial Average was down 0.06% at 49,136, the broad-based S&P 500 had lost 0.5% to 7,138 and the tech-heavy Nasdaq Composite had shed 0.9% to 24,663.
That’s despite good fundamentals. “We have a quarter of S&P 500 companies’ reports in so far,” Ritholtz Wealth Management CEO Josh Brown observes about the earnings calendar. And we’re seeing the sixth consecutive earnings season of double-digit profit growth.
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“It’s not accounting tricks. Revenue is higher for all 11 sectors.” As Brown notes, “American Express (AXP, -1.2%) says cardholders under 45 are spending more than ever. Gas prices and AI displacement fears are not a thing.”
Indeed, the front-month West Texas Intermediate crude oil futures contract was up 3.7% to $99.92 per barrel after the United Arab Emirates announced its withdrawal from OPEC, effective May 1. The front-month Brent crude oil futures contract, the international benchmark, was up 2.7% to $104.42.
WTI is up 49.1% and Brent is up 44.1% since the start of the war in the Middle East between the U.S., Israel and Iran, as investors, traders and speculators, as well as consumers, continue to absorb the energy shock.
Meanwhile, Jerome Powell has convened his final FOMC meeting as Fed chair and will host his final press conference on Wednesday, the highlight of this week’s economic calendar.
You can track news and developments around the April Fed meeting on our live blog.
OpenAI misses revenue, user targets
OpenAI is only in the planning stages for an initial public offering (IPO), but markets are still captivated by its numbers.
In fact, tech stocks generally and names connected to the AI revolution specifically sold off on Tuesday after The Wall Street Journal reported that the privately held research and deployment company has missed recent revenue and user targets and has insiders wondering whether it can meet its spending commitments.
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“Chief Financial Officer Sarah Friar has told other company leaders that she is worried the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough,” the WSJ said, citing “people familiar with the matter.”
Companies with particular exposure to OpenAI, including Oracle (ORCL, -4.1%) and CoreWeave (CRWV, -5.8%), fell hard. Semiconductor stocks such as Advanced Micro Devices (AMD, -3.4%), Broadcom (AVGO, -4.4%) and Intel (INTC, -0.5%) slid on broader fears of ebbing demand for AI-related infrastructure.
Nvidia (NVDA) was down as much as 3.9%. The leader of the AI revolution is scheduled to report fiscal 2027 first-quarter results after the closing bell on May 20.
Five other Magnificent 7 stocks – Alphabet (GOOGL, -0.2%), Amazon.com (AMZN, -0.5%), Meta Platforms (META, -1.1%) and Microsoft (MSFT, +1.0%) and Apple (AAPL, +1.2%) – are on this week’s earnings calendar.
Have a Coke and a smile
Coke posted earnings of 86 cents per share (+17.8% year over year) on revenue of $12.5 billion (+12.1% YoY) vs a Wall Street forecast for EPS of 81 cents on revenue of $12.2 billion. Management reiterated guidance for full-year EPS growth of 8% to 9% on organic revenue growth of 4% to 5%.
The blue-chip dividend stock generated free cash flow of $1.8 billion for the quarter, validating management’s move in February to increase Coca-Cola’s dividend for the 64th straight year.
New CEO Henrique Braun, who assumed his role on March 31, said Coke’s performance reflects an “unwavering focus on staying close to the consumer,” noting “there’s so much more we can do as we navigate a dynamic environment.”
