Stocks opened slightly higher in the U.S. on Tuesday, helped by better-than-expected earnings from blue chip companies like Johnson & Johnson and General Electric. The results offset renewed worries that troubles with COVID-19 vaccine rollouts and the spread of new variants of coronavirus might delay a recovery from the pandemic.
The S&P 500 index was up less than 0.1% in the first 15 minutes of trading. The Dow Jones Industrial Average rose 0.3%, and the Nasdaq composite was effectively unchanged.
U.S. investors are in the midst of first-quarter earnings reporting season for U.S. companies, and this is the busiest week so far. Dozens of large companies are reporting this week, from all parts of the economy, including American Express, J&J, Apple, GE and others.
More than 100 companies in the S&P 500 are scheduled to tell investors this week how they fared during the last three months of 2020. As a whole, analysts expect S&P 500 companies to say their fourth-quarter profit fell 5% from a year earlier. That’s a milder drop than the 9.4% they were forecasting earlier this month, according to FactSet.
General Electric jumped 9.5% after the industrial conglomerate reported a surge in cash flow. GE is in the midst of a turnaround after shedding unprofitable divisions and focusing more on big industrial products like jet engines and power equipment. Typically, when a company is in turnaround, investors care more about cash flow than quarterly profits because it shows the company is able to pay down debts.
American Express fell 2.5% despite reporting stronger-than-expected earnings. The company reported that its cardmembers continue to hold off on traveling, entertaining and dining out due to the pandemic, which has cut into the company’s bottom line.
Traders are keeping a wary eye on rising coronavirus infections in various countries and a bumpy rollout of vaccinations in the U.S. The spread of variants that are thought to be more easily transmissible and might be less effectively targeted by existing vaccines is adding to alarm.
Vaccine maker Moderna said Monday that it will study whether a booster shot would be needed to protect against variants of the coronavirus, “out of an abundance of caution.”
“Nowadays the market mood is set by either the hopes that the COVID vaccine would mark the end of the biggest economic downturn of our lifetime, or the stimulus hopes to keep our heads above water. Yesterday, both hopes got smashed,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a commentary.
President Joe Biden has proposed a $1.9 trillion plan to send $1,400 to most Americans and deliver other support for the economy. But his party holds only the slimmest possible majority in the Senate, making approval uncertain. Several Republicans have already voiced opposition to parts of the plan.