mixed stock. But the earnings were mostly good. Just avoid technology

New York
CNN Business
–

Recession fears still haunt Wall Street. The main indicator in the bond market is Flashing signs of potential contraction.

The spread between the short-term 3-month Treasury yield and the benchmark 10-year yield reversed briefly late Tuesday and did so again on Wednesday. This means that the yields on short-term bonds were higher than those on long-term bonds. Both are currently hovering around 4%.

This is a bad sign – and it often precedes recessions – because it shows how anxious investors are. Short-term bonds usually have much lower returns because investors expect to get higher returns for borrowing money for longer periods of time.

Another major yield curve, the difference between 2-year and 10-year Treasuries, has been continually inverted since early July after Inverted briefly in March.

still stock rebounded sharply in Octoberdespite persistent fears of an outbreak inflation Globally, a strong dollar hurts multinational companies and Political and economic turmoil in the United Kingdom. Much of the optimism has to do with the fact that investors are hoping the Federal Reserve will soon start slowing the pace of rate hikes.

But there is another reason. The earnings have actually been, in Larry David’s words Curb Your Enthusiasm, very good. Just stay away from the tech sector that was once hot.

The owner of Google Alphabet

(The Google) and Microsoft

(MSFT) Investors disappointed With them Latest predictions later Tuesday. Texas Instruments chip giant

(txen) and Spotify Music Streaming Company

(spot) Wall Street was also stunned.

All four stocks fell on Wednesday. This is a big reason why Nasdaq It’s down 2%, even as the market ran a little better. The daw He finished the day up 2 points, while the Standard & Poor’s 500 It decreased by only 0.7%. But the Dow was higher earlier in the day, and the S&P 500 was also briefly in the green..

Top tech (whatever the FAANG shares were called before the name was changed and the stock index) makes up a large part of the S&P 500’s weight. Investors are now waiting to hear from the likes of the Facebook owner meta padswhich records profits after the closing bell Wednesday, and Amazon

(AMZN) hail

(AAPL)which is presented Thursday afternoon.

Weakness in technology is lowering earnings expectations for the broader market. According to data from FactSet chief earnings analyst John Butters provided to CNN Business Wednesday morning, analysts now expect earnings growth of just 0.6% in the third quarter for the S&P 500. That’s down from estimates of 1.5% as recently as Friday.

Wall Street expects profits to fall for both the technology and telecoms sectors.

“I still don’t like technology. There aren’t a lot of values ​​out there. These companies aren’t growing in the sky anymore,” said Brian Frank, chief investment officer at Frank Funds.

Look beyond technology though there are many bright spots to be found in Corporate America report cards.

Giant Credit Card (and Dow Component) Visa

(Fifth) The company reported earnings and revenue that beat analysts’ expectations, and the company also boosted its earnings. Kraft Heinz

(KHC) It posted strong results Wednesday morning, sending its stock soaring. This good news comes on the heels of strong results from General Motors

(GM) And Coca-Cola

(KO) Tuesday morning.

There are many parts of the economy that are still doing well. Along these lines, FactSet data shows that analysts expect double-digit profit growth for consumer, industrial and real estate companies. Profits in the energy sector are expected to more than double thanks to higher oil prices this year.

Two other encouraging signs? Nearly three-quarters of the S&P 500 companies that have reported earnings so far have exceeded expectations. (It’s only natural that lost profits are getting more attention on Wall Street.)

Moreover, demand is still fluctuating for many companies. Revenue is expected to grow 8.6% in the quarter, according to FactSet. So weak profits are a function of rising costs rather than a significant slowdown in sales.

“Overall, earnings are doing well given the environment,” said Max Wasserman, portfolio manager at Miramar Capital.