Stock Market Today: Caterpillar's Revenue Miss Sends Dow Down 402 Points

Caterpillar excavator and dump truck digging hole in street Getty Images

Stocks struggled to get off the ground on Tuesday amid concerns that a visit to Taiwan by U.S. House Speaker Nancy Pelosi will raise political tensions between Washington and Beijing. This marks the first visit by a House speaker to Taiwan since 1997 – and sparked warnings by China of retaliatory measures. It claims the self-ruled island as part of its territory.

And underwhelming jobs data did little to lift investor sentiment. The latest Job Openings and Labor Turnover (JOLTS) data showed job openings fell to 10.7 million in June from 11.3 million in May.

The number of hires and quits also slowed on a month-over-month basis, which could indicate the job market is leveling off, says Robert Conzo, CEO of investment advisory firm The Wealth Alliance. “We believe the Fed will utilize this data point to determine if the economy is slowing,” Conzo adds. “Although continued interest rate rises may occur in the near term, data such as this may warrant smaller hikes than originally planned, helping the Fed to engineer a soft-landing.”

On the earnings front, Caterpillar (CAT) fell 5.8% as the construction giant’s top-line miss overshadowed higher-than-expected earnings. Plus, CAT’s Q2 sales are still lower than pre-pandemic levels, and the company’s 11% year-over-year rise in revenue is more reflective of higher prices versus additional products being sold, says CFRA Research analyst Colin Scarola.

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Caterpillar’s loss weighed on the Dow Jones Industrial Average, which fell 1.2% to 32,396. The S&P 500 Index (-0.7% at 4,091) and Nasdaq Composite (-0.2% to 12,348) also ended in negative territory.

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YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 eded marginally lower at 1,882.

  • U.S. crude futures gained 0.6% to settle at $94.42 per barrel.

  • Gold futures rose 0.1% to $1,789.70 an ounce, their fifth straight win.

  • Bitcoin edged down to $22,962.37. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

  • Uber Technologies (UBER) soared 18.9% after the ride-hailing company reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $364 million and revenue of $8.07 billion in its second quarter. Plus, the company said gross bookings were up 33%  year-over-year to $29.1 billion. “We are constructive on the risk/reward for the stock with positive share and margin trends,” says BofA Global Research analyst Justin Post (Buy).

  • Pinterest (PINS) spiked 11.6% today after the social media stock reported earnings. While PINS adjusted earnings per share of 11 cents and revenue of $666 million were both below analysts’ estimates, global monthly users of 433 beat expectations. “PINS reported a mixed but better-than-feared second quarter and offered what we view as constructive commentary, indicating 1) positive revenue growth in 3Q (+MSD), 2) global MAUs should return to more normal seasonal growth trends in 2H, and 3) investment pace should moderate in 2023,” says Wells Fargo analyst Brian Fitzgerald (Overweight). “While we believe some investors remain skeptical of PINS’ Idea Pins content strategy, we see an emerging content consumption/creation flywheel and think PINS is making the right moves to drive engagement while continuing to refine relevance and shopping tools.” Separately, activist investor Elliott Management last night confirmed that it is PINS biggest shareholder.

The Best Dividend Growth Stocks

There’s likely more volatility ahead, which makes the case for high-quality stocks as strong as ever. True, the S&P 500 just marked its best month since November 2020 and its best July since 1939, says Savita Subramanian, head of equity and quantitative strategy at BofA Securities, but “we view this as a bear market rally.”

No need for investors to be alarmed. Bear market rallies, which are simply short-term stock market rebounds amid a longer-term decline, are common, adds Subramanian. She points out that they have occurred 1.5 times, on average, in each bear market going back to 1929. But combine this with the fact that August and September are, historically, two of the weakest months for the S&P 500, the strategist says, and it’s likely that volatility will continue. As such, she prefers high-quality stocks.

Investors looking for high-quality stocks will want to focus on those prioritizing shareholder-friendly initiatives like share buybacks or impressive yields, as these can help protect portfolios against broad-market downturns. They’ll also want to consider the best dividend growth stocks, which can provide both income and capital appreciation over the long haul. Read on as we explore 10 such stocks that are expected to grow their dividends and revenue by at least 10% over the next two years.

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