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Stock market fluctuates following earnings, Fed speculation

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Stock market fluctuates following earnings, Fed speculation

US stocks fluctuated Tuesday as investors weighed second quarter earnings and the future of Federal Reserve monetary policy. The S&P 500 was unable to extend its record high into Tuesday’s session, despite better-than-expected profits for companies listed under the benchmark gauge.

Netflix (NASDAQ:NFLX) shares declined for the second consecutive day amid slower-than-expected subscriber gains. Losses intensified in Monday’s after-hours trading after Netflix released its second quarter earnings report. Despite stronger-than-expected profits, subscriptions failed to meet Wall Street’s expectations. Netflix added 630,000 subscribers in the second quarter, versus expectations of 700,000. Netflix shares declined another 4.47 percent to close at $250.26.

Texas Instruments (NASDAQ:TXN) , the world’s largest analog chip-maker, saw its share price rise following upbeat third-quarter sales and profit forecasts. The Dallas-based company is projecting revenues of up to $3.35 billion for Q3 2013, higher than what most analysts had projected. Per share earnings could reach 57 cents, higher than estimates for 51 cents. Texas Instruments soared more than 4 percent to close the New York session at $38.93.

The S&P 500 spent most of the day on the downside, closing at 1,692.39 (-0.19 percent). The Dow Jones Industrial Average was the biggest winner, advancing 0.14 percent on the back of strong earnings from United Technologies. The NASDAQ Composite incurred the heaviest losses, declining 0.59 percent on the back of weak Microsoft (NASDAQ:MSFT) and Broadcom shares (NASDAQ:BRCM) .

One of the major factors behind Tuesday’s volatility was speculation about the future of Fed stimulus. Despite weaker-than-expected home sales, the US real estate market is booming, and home builder confidence hasn’t been higher in seven years. The market has accepted the fact that Fed tapering is likely to commence over the next four to five months, and is taking concerted steps to prepare for the post-QE3 financial world. This means investors have accepted low growth scenarios in the US. At the same time, other investors have shifted their focus to earnings, and are confident growth can continue without federal stimulus.

No clear timetable exists for stimulus reduction. According to Bloomberg’s July 18-22 survey, half of economists expect the Fed to scale back the pace of its asset purchase to $65 billion at its September meeting.

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Iron FX 1.11156/1.11128 2.8
XM Markets 1.09948/1.09928 2
FxPro 1.10184/1.10171 1.3
FXCM 1.13943/1.13912 3.1