US stocks subdued as investors weigh earnings, data

U.S. stock indexes were muted on Wednesday as investors assessed mixed corporate results as well as crucial data showing the economy maintained a steady pace of growth in the third quarter.

Shares of Alphabet, the first of the five "Magnificent Seven" megacap stocks due to report results this week, soared 5.8% after the company beat expectations for third-quarter revenue and profit on strength in its cloud business and YouTube ad sales.

However, downbeat earnings elsewhere, notably a slump in chip stocks, limited gains, as Advanced Micro Devices dropped 8.9% after its forecasts for fourth-quarter revenue and AI chip sales disappointed investors.

Other chip shares also slipped, with Nvidia down 2.1%, while the Philadelphia SE Semiconductor Index lost 2.9%.

A 3.9% loss in the shares of Caterpillar weighed on the blue-chip Dow after the company cut its annual sales forecast on slowing demand.

In economic data, the U.S. gross domestic product increased at a 2.8% annualized rate, according to the Commerce Department's advance estimate of third-quarter GDP, slightly below economists' forecast of 3.0% growth. Core Personal Consumption Expenditure rose 2.2% versus the 2.1% forecast.

"For the market, the stronger pace of GDP being paced by personal consumption doesn't really make the case for the Fed cutting (interest rates) at all," said Marc Ostwald, chief economist and global strategist at ADM Investor Services International.

The neck-and-neck race between U.S. presidential candidates Kamala Harris and Donald Trump was also at the top of investors' minds ahead of the Nov. 5 election.

"We may have some revisions when we go forward, but all that really matters is the election next week, because that could be quite pivotal in the direction that the U.S. takes above all," Ostwald said.

A separate report showed U.S. private payrolls growth surged by a higher-than-expected 233,000 jobs in October.

Tuesday's data showed U.S. job openings dropped to more than a three-and-a-half-year low in September, leading traders to increase bets on a 25-basis-point rate cut in the Federal Reserve's November and December meetings. Economists polled by Reuters echoed the view.

Megacaps Microsoft and Meta Platforms edged up 0.4% each, with both companies scheduled to report results after the bell.

Given the significant role they played in Wall Street's rally this year, megacaps will be the most closely watched in an earnings-packed week. Their results are expected to provide insight on whether heavy AI investment is translating into better company performances.

The Dow Jones Industrial Average rose 16.19 points, or 0.04%, to 42,249.24, the S&P 500 lost 8.19 points, or 0.14%, to 5,824.73 and the Nasdaq Composite lost 28.88 points, or 0.15%, to 18,683.87.

Eli Lilly slumped 13.3% after missing sales estimates for its popular weight-loss and diabetes drug.

The S&P 500 Healthcare sector was the biggest sectoral decliner, falling 1.5% to a three-month low, while Alphabet's gains lifted Communication Services to an all-time high.

Advancing issues outnumbered decliners by a 1.38-to-1 ratio on the NYSE, while declining issues outnumbered advancers by a 1.14-to-1 ratio on the Nasdaq.

The S&P 500 posted 11 new 52-week highs and two new lows, while the Nasdaq Composite recorded 49 new highs and 47 new lows.