On Wall Street, stocks experienced a rebound from their intraday lows, yet all three major indexes concluded the day in the red, as investors braced for one of the most anticipated earnings reports set to follow. The economic landscape saw a revival of government-collected data, with a particular focus on the upcoming release of the minutes from the recent Federal Open Market Committee meeting, which many believe will play a crucial role in guiding market sentiment.
Throughout the trading day, five of the eleven sectors within the S&P 500 faced declines, notably in consumer discretionary, industrial, utilities, financials, and technology. Concerns about the long-term viability and profitability of capital expenditures for new computing power have been central to this week’s sell-off. As fears of an AI bubble loom large, discussions around the sector’s sustainability intensify.
In more encouraging news, the Census Bureau reported that factory orders rose by 1.4% month-over-month in August, aligning with projections after experiencing a 1.3% decrease in July. Additionally, year-over-year orders demonstrated a rise of 3.3%. Meanwhile, the National Association of Home Builders’ Housing Market Index slightly improved to 38 in November, up from 37 in October, although it still remains below the threshold indicating growth.
Interest rates and the upcoming Federal Reserve meeting are critical issues dominating conversations among investors and traders. With the August jobs report set for release on Thursday, the anticipation builds around the broader implications for market movement. The earnings calendar is highlighted by what many consider the main event, occurring after Wednesday’s closing bell.
At the close of trading on Tuesday, the tech-heavy Nasdaq Composite was down 1.2%, settling at 22,432. The blue-chip Dow Jones Industrial Average saw a decline of 1.1%, closing at 46,091, while the broad-based S&P 500 fell by 0.8% to 6,617.
Honeywell (HON) faced significant scrutiny, experiencing a double downgrade from Bank of America Securities analyst Andrew Obin, who moved the stock to “Underperform” from “Buy,” reducing his 12-month price target from $265 to $205. Obin noted that as Honeywell prepares to split into two companies by late 2026, its recent performance has not met management expectations and earnings forecasts.
Meanwhile, Amazon (AMZN) and Microsoft (MSFT), both crucial players in AI infrastructure growth, were downgraded by Rothschild & Co Redburn analyst Alexander Haissl. Haissl expressed concerns about the high capital intensity required for generative AI development compared to cloud computing, leading to weaker pricing power in the sector. His adjustments dropped both stocks from “Buy” to “Neutral,” maintaining a price target of $250 for AMZN and reducing MSFT’s target from $560 to $500.
Home Depot (HD) struggled significantly, becoming the worst performer among the Dow Jones stocks after reporting earnings per share (EPS) of $3.62, which was a 1.4% decline year-over-year, against sales of $41.35 billion, reflecting a 2.8% increase. Analysts had anticipated EPS of $3.84 and sales of $41.15 billion. The company cited full-year comparable sales would be slightly positive, a downward revision from previous expectations of up to 1% growth, alongside an anticipated EPS drop of 5%, worse than earlier forecasts.
Analysts pointed to several contributing factors for Home Depot’s underperformance, including increased operating expenses, tariffs, rising wages, and logistics costs. High financing costs and limited turnover in the housing market have also dampened consumer spending on larger home improvement projects. Despite these short-term obstacles, some analysts suggest that by mid-next year, interest rates could decrease, shifting cost dynamics to favor long-term growth.
In parallel, Nvidia (NVDA) saw its stock fall by 2.8% ahead of its earnings announcement, generating additional interest from investors and analysts eager to dig into the company’s latest performance metrics and insights from CEO Jensen Huang’s press conference.
