With a little less than half of the S&P 500 companies having reported, the blended earnings growth rate shows a 0.1% rise, compared against a 2.0% decline expected at the start of earnings season, according to FactSet.
Moves in the market also come after President Donald Trump on Tuesday delivered his third State of the Union address, which painted an optimistic picture of the country’s future and touted the strength of the economy during his tenure.
A report on private-sector employment from Automatic Data Processing Inc. blew past economists’ consensus estimates, showing that 291,000 jobs were added in January, nearly double the consensus estimate of 154,000.
Separately, the services sector of the U.S. economy, which accounts for most activity, grew at the fastest pace in six months in January, according to ISM’s purchasing manager survey.
Earlier, a government report showed that the U.S. trade deficit fell in 2019 for the first time in six years, reflecting tariff-reduced imports from China, with a 1.7% decline to $616.8 billion in December.
Germany led the positive surprises, its service sector growing at its strongest pace in five months to rise to 54.2 from 52.9 in December.
The fourth-quarter reporting season for large U.S. companies is more than halfway done, with S&P 500 firms posting a 1.6% rise in earnings for the period, according to IBES data from Refinitiv.
Shares of Merck & Co. Inc. fell 2.9% as the company said it was spinning off its Women’s Health, Trusted Legacy Brands and Biosimilar Products businesses as it reported results.
In earnings news, Ford Motor Co shares fell 9.5% after the company delivered a weaker-than-expected 2020 forecast.
Tesla shares declined more than 17%, notching their second-worst day ever. Tesla’s decline came after Wall Street analysts called for caution around the high-flying stock. Tesla is up more than 80% for 2020 even with Wednesday’s drop.
Barclays auto analyst Brian Johnson — who is forecasting a 65% drop in Tesla — said in a note “the recent price action brings to mind NASDAQ c. 1999.” He also said Tesla is “fundamentally overvalued.”
Analysts at Canaccord Genuity and New Street Research downgraded the stock, denting sentiment around it, along with news of planned Model 3 delivery delays in China due to the coronavirus outbreak.
In other news, oil prices rose on Wednesday, boosted by OPEC and non-OPEC producers including Russia (an alliance collectively known as OPEC+) discussing potential further output cuts to counteract a potential drop in global oil demand amid the coronavirus outbreak. The OPEC+ committee met again Wednesday.
About 8 billion shares changed hands in U.S. exchanges, above the 7.7 billion daily average over the last 20 sessions.
Here are some key events coming up:
• The Reserve Bank of India’s interest rate decision is due Thursday.
• German factory orders for December are due Thursday, followed by industrial production on Friday.
• The U.S. employment report for January is set for Friday release.
Currencies
• The Bloomberg Dollar Spot Index gained 0.2%.
• The British pound fell 0.3% to $1.2992.
• The euro declined 0.4% to $1.0998.
• The Japanese yen weakened 0.3% to 109.806 per dollar.
Bonds
• The yield on 10-year Treasuries rose five basis points to 1.65%.
• The two-year rate added three basis points to 1.44%.
• Germany’s 10-year yield increased four basis points to -0.36%.
Commodities
• West Texas Intermediate crude increased 2.9% to $51.04 a barrel.
• Copper rose 1.7% to $2.578 a pound.
• Gold added 0.2% to $1,556.47 an ounce.
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