Day Traders Diary

4/18/23

The major averages finished little changed Tuesday as traders digested a slew of earnings reports and their implications for the U.S. economy. The broad market index edged up 3 points to end at 4,154, while the Dow Jones Industrial Average dipped 10 points, or 0.03%, to close at 33,976. The Nasdaq Composite inched down 4 points settle at 12,153.

Major benchmarks fluctuated as investors assessed the latest batch of key earnings reports. Despite a tough economic environment, Bank of America surpassed first-quarter expectations on the top and bottom lines as rates rose. Johnson & Johnson's stock fell 2.8% even after the pharmaceutical company beat estimates and raised its 2023 guidance.

Elsewhere, Goldman Sachs shares slumped 1.7% after the banking giant reported lighter-than-expected revenue, dragged down by a $470 million hit from its Marcus loans.

Despite Tuesday's moves, and expectations for declining profits against a backdrop of persistent inflation and rising interest rates, earnings season has so far proven resilient. All the major averages are up since the period kicked off.

But investors warn that profits topping already low expectations won't matter to a market staring at a Federal Reserve that's continuing to tighten into a potential recession.

"Today's mood is about profitability concerns [which] may have been overdone for the quarter, but Fed tightening fears won't be going away anytime soon," said Ed Moya, senior market analyst at Oanda.

Even after last month's dual bank failures sent shockwaves across the financial sector, more than 8 out of 10 of traders anticipate a 25 basis point increase next month, according to CME Group's FedWatch tool. It marks a stark contrast to the calls for a halt in hiking in March.

As another central bank policy meeting looms on the horizon, Atlanta Federal Reserve President Raphael Bostic told CNBC's "Squawk on the Street" on Tuesday that he anticipates one more 25 basis point hike, followed by a hold at that level "for quite some time."