Stocks Rise as Investors Await Big Tech Earnings

Stocks gained ground on Tuesday amid a revival in the benchmark 10-year Treasury yield, as investors awaited an avalanche of earnings from tech giants and other major companies. The Dow Jones Industrial Average (^DJI) popped more than 0.6%, the S&P 500 (^GSPC) rose above 0.7%, and the Nasdaq Composite (^IXIC) climbed nearly 1%. The 10-year yield (^TNX) inched higher to 4.84%, shaking off a slide earlier in the morning in another sign of volatility. On Monday, the yield topped 5% to reach its highest level since 2007, then sank in whipsaw action.

GM Pulls Profit Guidance Amid UAW Strikes

One of the biggest losers of the day was General Motors (GM), which pulled its 2023 profit guidance amid a jump in costs related to the UAW strikes. The automaker said it expects to lose about $2 billion in earnings before interest and taxes due to the labor dispute, which has lasted for more than a month. GM also reported lower-than-expected revenue for the third quarter, as vehicle sales declined in North America and China. Shares of GM fell more than 5% on Tuesday.

Stocks Rise as Investors Await Big Tech Earnings
Stocks Rise as Investors Await Big Tech Earnings

Spotify Surprises With Profit

On the other hand, one of the biggest winners of the day was Spotify (SPOT), which surprised by turning a profit amid expectations for a loss. The music streaming service reported a net income of $69.1 million for the third quarter, compared to a loss of $6.8 million a year ago. Spotify also beat analysts’ estimates for revenue and monthly active users, as it added more subscribers and advertisers. Spotify raised its guidance for the full year, expecting to reach between 255 million and 270 million premium subscribers by the end of 2023. Shares of Spotify soared more than 10% on Tuesday.

Bitcoin Rallies Above $35,000

In cryptocurrencies, bitcoin (BTC-USD) continued to rally, rising above $35,000 to its highest level since the 2022 crypto crash, thanks to speculation the SEC is about to approve an ETF linked to the token. The ETF, which would be based on bitcoin futures contracts, could attract more institutional investors and boost the liquidity and legitimacy of the crypto market. Shares in crypto-related companies such as Coinbase (COIN) and MicroStrategy (MSTR) were also getting a boost from the bitcoin surge.

Big Techs Set to Report After the Bell

But the spotlight was on big techs Alphabet (GOOGL) and Microsoft (MSFT), both seen as likely to post solid quarterly revenue growth when they report after the close. Eyes will be on what boost — if any — the megacaps are getting from the boom in artificial intelligence. Alphabet is expected to report revenue of $40.3 billion, up 19% year-over-year, driven by its core advertising business and its cloud computing segment. Microsoft is expected to report revenue of $32.2 billion, up 11% year-over-year, driven by its cloud services, gaming division, and LinkedIn platform.

US Manufacturing and Services Activity Slows Down

The economic docket brought reports on US manufacturing and services activity, watched for signs of a slowdown in growth ahead of Thursday’s key reading on third-quarter GDP. The IHS Markit flash US manufacturing purchasing managers’ index (PMI) fell to 51.5 in October from 51.9 in September, indicating a modest expansion in factory activity but at a slower pace than before. The IHS Markit flash US services PMI also dropped to 51.0 in October from 52.0 in September, indicating a slight increase in business activity but at the weakest rate since February 2016.

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