Stock Market’s Next Hurdle: Tech and Industrial Earnings

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Investors enjoying tranquility in the stock market are facing a new source of potential volatility: the quarterly earnings of industrial and technology companies that start reporting this week.

The S&P 500 and Dow Jones Industrial Average posted their smallest daily moves over a two-week period since September on Friday, according to Dow Jones Market Data.

The average one-day swing for both the S&P 500 and Dow was 0.6%, marking a sharp change from the violent moves that dominated last quarter. In the final two months of last year, both benchmarks moved on average by at least 0.95% daily, data looking at two-week periods show.

The S&P 500 fell 0.9% Tuesday morning, while the Dow industrials were recently down 0.7% on fresh worries about slowing global growth.

Still, stocks have staged a remarkable rebound in 2019 on the back of a strong jobs report, dovish Federal Reserve comments and better-than-expected bank earnings. The Cboe Volatility Index, which tracks volatility expectations, has fallen 25% this year. Fresh hopes for a U.S.-China trade compromise have also brightened the outlook for the global economy.

But some investors and analysts worry that a flurry of downbeat corporate results could derail the recovery in shares.

“The minefield gets a little bit dicier with more companies reporting,” said Yousef Abbasi, global market strategist at INTL FCStone.

Chip makers

Intel
Corp.

and

Texas Instruments
Inc.

are scheduled to report this week. The companies, which make products involved in everything from videogame consoles to smartphones, are a key barometer for the global economy. Investors will be scrutinizing their results after the stocks were battered last year by the U.S.-China trade dispute.

Semiconductor stocks were among the market’s worst performers Tuesday after recent figures showed China’s economic expansion languished to its slowest pace in nearly three decades last year. The International Monetary Fund also cut its forecasts for world economic growth in 2019 to 3.5%, down from 3.7% forecast in October and 3.9% expected in July. Its cut came on the back of a similar downgrade from the World Bank earlier this month.

International Business Machines Corp. will also be releasing results after reporting in October an end to three straight quarters of revenue growth.

Also reporting this week are industrial companies and manufacturers that have faced higher input costs because of tariffs. Stocks in the group surged Thursday and Friday on signs the U.S. and China may compromise on trade.

But

Ford Motor
Co.

warned last week that its 2018 profit will fall short of Wall Street expectations. The auto maker and two other large manufacturers,

Stanley Black & Decker
Inc.

and

United Technologies
Corp.

, will post their latest numbers this week.

Also on deck: earnings from companies widely considered to be safer investments because of their relatively stable businesses and hefty dividends. Many money managers favored such groups late last year.

They include health-care companies—the market leaders of 2018—like

Johnson & Johnson
,

Abbott Laboratories

and

AbbVie
Inc.,

as well as makers of consumer staples such as

Procter & Gamble
Co.

,

Kimberly-Clark
Corp.

and

Colgate-Palmolive
Co.

Shares of Johnson & Johnson fell more than 1.5% Tuesday, dragging down the health-care sector, after the company said litigation costs nearly doubled in the fourth quarter as it looks to fight lawsuits over the safety of the company’s signature baby powder.

Mr. Abbasi pointed out that even the largely strong results from the big banks were uneven. Some posted softer-than-projected quarterly revenue, as last quarter’s wild swings dented trading.

“These mediocre results are getting lauded because expectations were so low,” said Mr. Abbasi. “It’s going to get more arduous to rally on the back of bad news.”

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Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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