Traders work on the floor at the New York Stock Exchange on Feb. 7, 2024.
Brendan Mcdermid | Reuters
U.S. stock futures were flat Tuesday night after the Dow Jones Industrial Average posted its biggest decline since March 2023.
Futures tied to the Dow slipped 14 points, or 0.04%. S&P 500 futures inched up 0.02%, and Nasdaq 100 futures added 0.07%.
In after-hours trading, Lyft shares jumped more than 18% after the ride-hailing company posted better-than-expected earnings in the fourth quarter. Airbnb slipped more than 4% even as the company beat on revenue expectations in its latest quarter.
During Tuesday’s regular session, the 30-stock Dow shed 1.35% for its worst day since March 2023. The S&P 500 lost 1.37%, and the Nasdaq Composite slumped 1.8%. A hotter-than-anticipated inflation reading incited the sell-off as traders fretted that the Federal Reserve may not cut interest rates as early as they had hoped.
The consumer price index gained 0.3% in January on a monthly basis and rose 3.1% year over year. Meanwhile, economists polled by Dow Jones were forecasting a 0.2% month-over-month increase and 2.9% from the prior year.
Although January’s CPI report likely pushes the likelihood of a Fed rate cut to the second half of 2024 — versus investors’ initial expectations of rate cuts as early as March — the market rally isn’t over, according to U.S. Bank Wealth Management chief equity strategist Terry Sandven.
Tuesday’s pullback “allows valuations to come a little bit more in line with fundamentals. The reset gives investors oriented toward reasonable valuations an opportunity to perhaps get into the market,” he said.
“But importantly, with inflation, interest rates and earnings still being supportive of higher equity prices, we do not believe this is the beginning of the end, with a prolonged downturn in front of us,” Sandven added.
On Wednesday, Wall Street will be listening for comments from Chicago Fed President Austan Goolsbee.
Investors are ‘way over our skis’ on AI, Jeremy Grantham says
Artificial intelligence will be more than just a passing fad, but that doesn’t mean now is a good time to buy the stocks tied to the trend, according to GMO co-founder Jeremy Grantham.
“My guess is we are getting wildly enthusiastic about AI. It is an incredibly important development, like the internet was, and probably more so. … But it will need a digestive phase. We are, I think, way over our skis,” Grantham said at the Exchange ETF conference on Tuesday.
The fund manager, who has built his multidecade career around identifying quality stocks and avoiding speculative booms, compared AI to the tech bubble around 2000 and the bubble in railroad stocks more than a century ago.
— Jesse Pound
European earnings could sustain their loftier levels, Bernstein says
European earnings have seen a robust season, and signs point to this strength staying, according to Bernstein.
“European forward earnings are currently 14% above their long-run trend, and 30% higher than pre-Covid at the market level, which makes for an uneasy visual,” the investment firm wrote. “Is there a risk of a significant cut to estimates and earnings return to long-run trend?”
To answer this question, Bernstein polled analysts covering banks, semiconductors, energy, autos and capital goods, or the European industries whose earnings have so far been most above trend.
“While near-term tactical earnings downgrades are expected in all cases, we do not see a significant risk of earnings returning to trend, for reasons which are idiosyncratic to each industry,” Bernstein wrote.
— Lisa Kailai Han
Stocks making the biggest moves after hours
Check out the companies making headlines in extended trading.
Robinhood Markets — Shares jumped 9.5% after the trading platform posted a surprise earnings and revenue beat. Robinhood reported 3 cents in earnings per share, versus analysts’ expectations of a loss of 1 cent per share, according to LSEG, formerly known as Refinitiv. Revenue came in at $471 million, topping the $457 million expected by analysts.
Lyft — The ride-hailing operator saw its shares soar 18.5% in extended trading after it reported strong fourth-quarter results and gave better-than-expected guidance. The company posted adjusted earnings per share of 18 cents for the fourth quarter, topping analysts’ estimates of 8 cents, according to LSEG. Revenue of $1.22 billion was in line with analysts’ expectations.
The full list can be found here.
— Hakyung Kim
Stock futures open flat Tuesday
U.S. stock futures opened little changed on Tuesday.
Dow Jones Industrial Average futures ticked down 19 points, or 0.05%. Futures tied to the S&P 500 traded near the flatline, while Nasdaq 100 futures gained 0.08%.
— Hakyung Kim