Market Insights

A handful of big companies announced strong results in the last week, but wider problems are tarnishing the story.

Feeble semiconductor demand, doubts about the industrial sector and lackluster guidance emerged as recurring themes as we progress through the busiest stretch of earnings season. The slowdown in China and tariff worries have worsened the situation.

Caterpillar (CAT) is a case in point. While the heavy-equipment company beat estimates, it failed to raise guidance. Investors, assuming the worst, interpreted that as a sign of weakness in China to liquidate the stock.

Other industrial companies like 3M (MMM) and Stanley Black & Decker (SWK) missed their numbers outright. SWK tried to blame higher costs from President Trump’s tariffs against China, although that doesn’t explain its poor sales. Maybe the bigger problem is the collapse of home building in the U.S.

You also have Advanced Micro Devices (AMD), one of TradeStation’s busiest symbols and the S&P 500’s top-performing stock this year. Last quarter, however, revenue missed estimates and guidance lagged. That’s punishing the stock today and making it the S&P 500’s second-worst performer in the last week.

Texas Instruments (TXN), a chip maker known for its greater exposure to industrial clients, also took a beating after revenue lagged and management said “demand for our products slowed across most markets.”

But it wasn’t all pain and misery because several high-profile companies shot higher after beating estimates.

Just look at Paypal (PYPL) and Twitter (TWTR). Both surpassed estimates across the board and showed signs of their longer-term growth stories playing out. PYPL recorded 78 percent growth at Venmo, its newer person-to-person payment app. TWTR also gained traction with big advertisers and higher rates.

Microsoft (MSFT) also beat estimates as CEO Satya Nadella successfully transforms the software giant into a cloud-computing powerhouse. Does Amazon.com (AMZN) finally have a bona fide rival?

Perhaps the most interesting results came from Tesla Motors (TSLA), which silenced critics with $881 million of free cash flow in the third quarter. Analysts mostly concluded the electric carmaker has resolved its operational problems and won’t need to hurt shareholders by raising more capital.

McDonald’s (MCD), Verizon Communications (VZ) and Procter & Gamble (PG) also impressed to the upside. MCD popped after hiking menu prices and growing its overseas business. VZ ripped to a new 18-year high after adding more subscribers than expected. PG also hiked prices and enjoyed strong beauty sales in China. All three stocks are members of the Dow Jones Industrial Average.

One other group stood out to the downside: medical devices. Dental-equipment provider Align Technology (ALGN) cratered on weak guidance. One of the S&P 500’s top gainers in recent years, it’s the index’s biggest loser in the last week. Intuitive Surgical (ISRG) also fell despite beating estimates.

In conclusion, some key firms had nice upside surprises since last Thursday. However, broader weakness in cyclical areas like semiconductors and industrials, kept sentiment bearish.