Stock Rally Extends to Small Caps; GM, Coca-Cola, 3M Report | Digireview

Major stock market indices traded higher in the first half of Tuesday’s session, led by strong small-cap price action. General Motors (GM) and Dow Jones component Coca-Cola (KO) recovered after earnings reports, while 3M (MMM) sold.


The Russell-2000 small cap index showed robust leadership, jumping 2.9%. The Nasdaq composite outperformed blue chips, up 1.9%. The Dow Jones Industrial Average lagged other benchmarks, up 0.8%, while the S&P 500 rose 1.2%.

Volume on the NYSE and Nasdaq fell from the same time on Tuesday.

Crude oil ticked higher, gaining less than 1% to $85.09 a barrel, while 10-year Treasury yields fell more than 3.5% to 4.07%.

European markets were mixed after the weakness in Asia. German and UK markets sold less than 1%, while the Paris CAC 40 rose less than 1%. British markets gave up an early rebound following Rishi Sunak’s rise to the post of Prime Minister.

Stock Market Q3 Profit Flood

General Motor rose 3.9% after reporting earnings of $2.25 a share, beating estimates by 37 cents. Revenue met expectations, rising 56.4% to $41.89 billion.

CEO Mary Barra cited strong demand for full-size trucks, but admitted inventory is rising, even if it remains below pre-pandemic levels.

Noting that consumers remain resilient and pay their bills, she echoed last week’s comments from JPMorgan (JPM) CEO Jamie Dimon.

Coca-Cola raised its growth expectations for the fourth quarter, with an increase of more than 1.5%. 3M fell more than 3% at opening and bounced back to a loss of 0.8% after missing third-quarter revenue estimates and lowering full-year revenue expectations.

In other earnings reports, Halliburton (HAL) rose 3.7% after beating the highest and lowest estimates in the third quarter, while United Parcel Service (UPS) rose 2.0% despite a mixed report.

Alphabet (GOOGL) reports after the closing bell, with analysts looking for earnings of $1.26 per share on revenue of $70.67 billion. GOOGL shares are expected to return to double-digit growth in 2023.

Microsoft’s earnings report (MSFT) is also available tonight. Growth in the Azure cloud division showed signs of sputtering in the latest report, so all eyes will be on that key metric. Mr. Softee is expected to earn $2.31 per share on $49.7 billion in third-quarter revenue.

Time to get bullish?

The bull case has been getting more attention since the stock market went up on Oct. 13. There are plenty of technical reasons for a multi-week rebound, with selling pressure easing after the vertical drop and many indexes approaching long-term support levels.

There is also growing speculation that the Fed will take a less aggressive stance after next week’s meeting, perhaps accelerating to 50 basis points instead of three-quarters of a point.

Last but not least, the outlook for 2023 this earnings season has so far not deteriorated as predicted.

However, it is a double-edged sword. As the CEOs of GM and JPMorgan noted, the US consumer remains resilient despite higher interest rates. That could lead the Fed to worry that it isn’t raising rates far enough or fast enough to meet its policy targets.

And, as Monday’s The Big Picture warned, “Three follow-throughs that occurred earlier this year all failed, as they often do in bear markets.” That’s a good reason to remain skeptical as you begin to build a cautious exposure that for most investors won’t exceed 20% of an equity portfolio.

Stock market: IBD 50 movers and shakers

IBD 50 component and Warren Buffett stock Occidental Petroleum (OXY) shook off early stock market pressures from Tuesday, trading about a point below the 72.14 buy point.

Vertex Pharmaceuticals (VRTX) jumped into the 5% buying zone on Monday after hitting the 306.05 buy point. The stock is now trading at a record high.

Finally, Harmony Biosciences (HRMY) broke above the 52.62 buy point in the first hour and pulled back. It is currently trading less than one point below the 5% buy zone.

Earnings for HRMY stocks in 2023 are expected to grow at a robust 112%.

Follow Alan Farley on Twitter at @msttrader.

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