US stocks were mixed on Thursday, as Wall Street digested fresh earnings from tech giants Alphabet and Tesla and considered the implications of an imminent trade deal between the US and the European Union.
The Dow Jones Industrial Average (DJI) fell 0.5%, weighed down by a post-earnings slump in IBM’s stock. Meanwhile, the Nasdaq Composite (IXIC) rose 0.4%, and the S&P 500 (GSPC) climbed 0.3%, continuing its streak of all-time highs. The market's cautious optimism was buoyed by the potential for a US-EU tariff agreement, while earnings from Alphabet and Tesla played a crucial role in shaping investor sentiment.
Market Movers:
- Tesla (TSLA): -7.77%: Tesla took a significant hit, dropping 7.77%, after posting a disappointing earnings report. CEO Elon Musk warned of "a few rough quarters" ahead, citing a dip in European sales and the expiration of EV incentives following the passage of President Trump’s budget bill. Tesla has already fallen around 18% this year, and the outlook for the upcoming quarters remains uncertain, particularly as the company faces challenges with its robotaxi rollout and global competition.
- Alphabet (GOOGL): +1.43%: Alphabet rose 1.43% following a strong earnings report that exceeded Wall Street's expectations. The Google parent company doubled down on its aggressive AI spending, a move that analysts have largely supported. Alphabet’s investments in AI are helping to drive growth in its search business, easing fears that AI could disrupt its core revenue stream.
- IBM (IBM): -8.36%: IBM saw a steep decline of 8.36% after disappointing sales in its core software segment, which failed to meet expectations. Despite an earnings beat, the company’s failure to provide a forecast for the third quarter and the weakness in its software sales weighed heavily on its stock. The company’s investments in AI infrastructure, particularly its AI-specialized mainframes, continue to perform well, but the decline in software sales signals potential challenges ahead.
- Southwest Airlines (LUV): -11.42%: Southwest Airlines took a major hit, falling 11.42%, after the airline lowered its full-year profit guidance and reported disappointing second-quarter earnings. The company cited a sluggish start to the peak summer travel season, weak domestic travel demand, and broader economic challenges as factors behind the earnings miss.
- UnitedHealth (UNH): -4.10%: UnitedHealth declined 4.10% after the company revealed that it is under investigation by the Department of Justice for its Medicare billing practices. The disclosure raised concerns about potential legal and regulatory risks for the insurance giant, which has seen strong growth in recent years. This investigation is adding pressure to an already volatile healthcare sector.
Trade Deal Hopes Support Market Sentiment
Investor sentiment has been bolstered by growing optimism around a potential trade deal between the US and the European Union. Recent reports suggest that the two parties are nearing an agreement that would impose a 15% tariff on imports, down from the 30% initially threatened. This potential deal comes on the heels of the US-Japan trade agreement that helped push the S&P 500 and Nasdaq to record highs earlier this week. The expectation of a more stable global trade environment is providing a foundation for positive market performance, although concerns remain over the broader effects of President Trump’s tariff policies.
In addition, the possibility of a US-EU deal could pave the way for further trade agreements before the August 1 deadline, when a new round of tariffs is set to take effect. However, unresolved issues persist with other major trading partners and the timeline for a final agreement remains uncertain.
Focus on Earnings and the Fed
Earnings season is in full swing, and Wall Street is closely monitoring the performance of key tech companies, including Alphabet and Tesla. Alphabet’s strong results reflect the growing importance of AI investments, which are helping to sustain its growth despite challenges in the broader tech sector. Meanwhile, Tesla’s struggles highlight the challenges faced by the EV industry, particularly as government incentives fade and competition intensifies.
Additionally, the Federal Reserve remains a focal point for investors. President Trump’s criticism of the Fed’s interest rate policies continues to add tension to the economic landscape. Trump is expected to visit the Federal Reserve’s headquarters later today, following weeks of public criticism over its $2.5 billion renovation. The visit underscores the ongoing political pressure on the Fed, which could have implications for future monetary policy decisions.
Looking Ahead
As earnings season continues, all eyes will be on Tesla and Alphabet’s performance in the coming quarters, with investors looking to assess the sustainability of their growth amid economic uncertainty and global competition. Tesla’s outlook for the next few quarters could impact broader sentiment in the electric vehicle sector, while Alphabet’s continued focus on AI may provide a roadmap for the future of tech.
The potential US-EU trade deal will remain a key topic for market watchers, as its resolution could provide a boost to global trade and market stability. However, uncertainties surrounding the Fed’s policies and broader economic conditions will likely keep investors on edge as the market navigates the remainder of the summer.