U.S. equities pushed higher on Tuesday as Wall Street entered the thick of second-quarter earnings season. The S&P 500 ended 0.3 percent higher, notching a new record of 2,477. While the Federal Reserve kicked off a two-day policy meeting on Tuesday, investors aren't focusing on the risk of another rate hike but on corporate earnings.
McDonald's landed at a new record of $159.07, thanks to a 6.6 percent rise in global same-store sales as the breakfast-all-day initiative gives way to the "Experience of the Future" push that promises to see smart tablets enable custom ordering and VR-connected Happy Meals. Caterpillar shares exploded higher (chart above) on the company's solid results, especially overseas, and its raised forward guidance.
Google parent Alphabet (GOOGL) suffered a 2.6 percent drop on Tuesday to once again test its 50-day moving average (chart above) after reporting better-than-expected earnings and revenue on Monday night. But profit margins dropped to 16 percent from 28 percent amid price pressure on ad sales and the drag from a paid to the European Union.
Analysts at Aegis Capital noted that the cost of acquiring Google customer traffic increased at a 28.1 percent annual rate vs. a 22.2 percent rate in the first quarter. That represents the highest increase in nine years. Moreover, heightened competitive pressures -- especially in mobile -- necessitated capital spending in hardware, YouTube content and cloud computing, further buffeting profitability.
This was just a warm-up for tech investors, however, as Amazon's highly awaited results come out after the close on Thursday. Analysts are looking for earnings of $1.39 per share on revenues of $37.2 billion. When the e-commerce giant last reported on April 27, earnings of $1.48 per share beat estimates by 38 cents on a 22.6 percent increase in revenues from the year prior.
Keep an eye on the balance between smaller but high-margin businesses like Amazon Web Services and Fulfillment by Amazon vs. areas of investment such as video content.
Apple will report on Aug. 1 after the close. Both iPhone and China sales will be in focus again, and they'll likely show a slump ahead of the eagerly awaited iPhone 8 release later this year.
According to RBC Capital, the newest Apple smartphone could be delayed because of supply-chain issues with its new organic LED display. Analysts don't expect volume shipments to occur until November or December vs. mid to late September historically for new iPhones.
Overall, second-quarter earnings through Friday have been positive. According to FactSet, with 19 percent of the companies in the S&P 500 reporting, 73 percent have beat their earnings estimates and 77 percent have beat their sales expectations. The forecast for the S&P 500 earnings growth rate stands at 7.2 percent.