Closing Market Update

(Wednesday market close) U.S. stocks ended mixed Wednesday as stronger-than-expected economic numbers boosted Treasury yields and investors readied for quarterly earnings from Meta Platforms (META) and a few other big technology companies.

Stocks got out of the gate firm with help from a 12% rally in Tesla (TSLA) after CEO Elon Musk told investors late Tuesday that production of a lower-cost electric vehicle may begin sooner than expected. Musk's words overshadowed Tesla's weaker-than-expected quarterly results, which included a 9% revenue tumble.

The 10-year Treasury note yield (TNX) crept above 4.67%, its highest level in over a week, after the Commerce Department reported Durable Goods orders rose 2.6% in March, which is above analysts' forecasts.

Facebook parent Meta's quarterly numbers were expected after Wednesday's close and will be followed by Microsoft (MSFT) and Alphabet (GOOGL) results Thursday. Dow members Caterpillar (CAT), Honeywell International (HON), Intel (INTC), and Merck (MCK) also report Thursday.

"Stocks started the day with continued momentum from an oversold bounce but started losing ground mid-morning, perhaps due to higher Treasury yields, which are hovering around highs for the year," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research.

According to Peterson, Tesla's "relief rally" may have contributed to initial stock market gains. "But right now, it appears the onus is on the bulls to prove the bullish narrative is still intact, and that narrative remains predicated on strength in both the economy and corporate earnings combined with continued disinflationary trends and potentially one to two rate cuts this year from the Fed," Peterson added.

Here's where the major benchmarks ended:

• The S&P 500 index^® (SPX) rose 1.08 points (0.02%) to 5,071.63; the Dow Jones Industrial Average^® ($DJI) fell 42.77 points (0.1%) to 38,460.92; the Nasdaq Composite^® ($COMP) added 16.11 points (0.1%) to 15,712.75.
• The 10-year Treasury note yield rose more than 4 basis points to 4.644%.
• The Cboe Volatility Index^® (VIX) rose 0.28 to 15.97.

Transportation shares were among the market's weakest performers Wednesday behind a drop of more than 10% in Old Dominion Freight Line (ODFL), which reported lighter-than-expected quarterly revenue. The shipper's nosedive helped send the Dow Jones Transportation Average ($DJT) down 2.3%. Consumer staples, semiconductors, and utilities posted moderate advances. The Dow Jones Utility Index ($DJU) gained for the sixth straight day and ended at a three-and-a-half-month high.

Benchmarks like the S&P 500 index remained under technical pressure in the wake of last week's steep downturn, Peterson noted. 

"Technically, we still have repair work to do across the major averages, all of which dropped below their respective 50-day simple moving averages over the past two weeks," Peterson said. "Perhaps we just need to go through a sideways consolidation period to work off some of the first-quarter euphoria that built up around AI, strong economic data, and notions of an accommodative Fed."

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

• Biogen (BIIB) added 4.6% after the drugmaker posted stronger-than-expected earnings. 
• Boeing (BA) fell 2.9% despite reporting a smaller-than-expected quarterly loss and larger-than-expected revenue. 
• Mattel (MAT) gained 2.4% after the toy company reported a smaller-than-expected quarterly loss. 
• General Dynamics (GD) sank 4% after the aerospace and defense company's first-quarter results disappointed investors. 
• Hasbro (HAS) soared 12% after the company's earnings and revenue surpassed expectations. 
• Hilton Worldwide Holdings (HLT) advanced 3.9% after posting better-than-expected earnings. The company also raised its full-year guidance. 
• Texas Instruments (TXN) jumped 5.6% after the chipmaker's first-quarter earnings and revenue surprised to the upside.

Thursday's earnings calendar also includes AstraZeneca (AZN), Bristol-Myers Squibb (BMY) Comcast (CMCSA), T-Mobile US (TMUS), Union Pacific (UNP), and Valero Energy (VLO).

Of the approximately 138 S&P 500 companies that reported quarterly earnings so far, about 52% have exceeded revenue expectations and 80% have topped earnings expectations, according to Peterson. The revenue beat rate "has been relatively weak over the past three quarters relative to the past several years," Peterson explained.

Technology "has been key to the bullish thesis, not just from an earnings growth contribution perspective but also from a sentiment perspective," Peterson added. After some "relatively lukewarm" earnings reports from a few semiconductor makers and other companies, "it's incumbent on mega-cap tech to validate current multiples."

The Commerce Department's monthly Durable Goods report suggested demand for big-ticket, long-lasting manufactured products, such as airplanes and appliances, remained firm. The 2.6% jump in durable orders in March exceeded expectations for an increase closer to 1.5%. Excluding transportation, orders rose only 0.3%, slightly under expectations.

Investors must wait until Thursday and Friday for perhaps the most anticipated economic numbers of the week.

On Thursday, the government releases its first estimate for first-quarter gross domestic product (GDP). Analysts expect an annually adjusted growth rate of 2.5%, down from 3.4% in the fourth quarter, according to Trading Economics. 

Amid heightened inflation worries, the report's GDP Deflator will be of keen interest. The deflator rose 1.7% in the fourth quarter. Analysts expect that figure, which measures the cost of all final domestically produced goods and services across the economy, to accelerate to a 3% gain in the first quarter.

A recent string of robust economic numbers has prompted many economists to boost first-quarter growth expectations, reinforcing beliefs the Fed won't be in any hurry to lower rates. The Atlanta Fed's GDPNow model currently pegs GDP to grow at a seasonally adjusted annual rate of 2.9%, not much below the final Q4 reading of 3.4%. That monitor gets updated today.

Friday's March Personal Consumption Expenditures (PCE) price index report from the Commerce Department may be the most highly anticipated report of the week. The PCE price index measures average prices related to U.S. domestic consumption and is considered the Federal Reserve's preferred gauge of inflation. 

Analysts expected overall and core PCE to increase 0.3% on a month-over-month basis, according to Trading Economics, matching the 0.3% increases for each in February. Core strips out volatile energy and food prices. On an annual basis, analysts expect PCE to be up 2.6% and core PCE to also rise 2.6% compared with 2.8% and 2.5%, respectively, a month earlier.

Late Wednesday, traders priced near-100% odds the fed funds target will remain unchanged at 5.25% to 5.5% following the Federal Open Market Committee's (FOMC) meeting April 30 – May 1, according to the CME FedWatch Tool. 

The indicator shows 81% odds the rate will be held unchanged following the FOMC's June 11 – 12 meeting and a 54% chance for no change following the committee's July meeting.