Wall Street traders had another uneventful day, but Wednesday saw more gains as investors remained positive after the latest earnings reports from companies.
After briefly being in the red during the first part of the year, the S&P 500 gained 0.9%. The Dow Jones Industrial Average climbed 0.6%, while the Nasdaq gained 0.5%. These gains put the indexes on track for solid gains this week.
Shares in several companies with solid quarterly results were bought by traders to boost the market. After it announced that its digital ad company saw a 36% increase in profits last quarter, Google parent Alphabet jumped 7.5% to be the largest gainer in the S&P 500. Advanced Micro Devices, a chipmaker, rose 5.1% after reporting strong fourth-quarter financial results. Investors were also given a positive sales forecast.
The benchmark S&P 500 index saw a rise of around three-quarters of companies, mainly due to technology stocks and communication services. A large portion of the gains were also attributable to health care companies. Companies that depend on consumer spending and big retailers fell. Amazon dropped 0.4%, while Gap fell 3.3%.
The majority of companies that reported their results in the past three months of 2021 have achieved earnings and revenue that exceeded Wall Street’s expectations, despite higher inflation-related costs.
“So far, we are not seeing the type of margin pressure people might be concerned about with rising input prices,” stated Tom Hainlin (national investment strategist, U.S Bank Wealth Management). That’s been a great support on the foundation.
The S&P 500 gained 42.84 points, or 4,589.38. The Dow gained 224.09 point to 35,629.33 and the Nasdaq gained 71.54 points to 14,417.55.
The rally in the wider market was resisted by small company stocks. Russell 2000 index dropped 21.22 points or 1% to 2,029.52.
Bond yields fell. The 10-year Treasury yield fell to 1.7% on Tuesday, from 1.80%.
Major stock indexes are expected to make solid gains this week. This is a welcome recovery from January’s losses. Wall Street was facing several threats, including rising inflation and higher interest rates. COVID-19 continues to drag down the economic recovery. This month’s slide was caused by Wall Street’s last month’s slide.
Rising costs are a major concern. They threaten profit margins, and increase consumer spending. To try to cool inflation, which has been at an all-time high for four decades, the Federal Reserve will raise interest rates. Investors anticipate the first rate increase in March, and at least three more in 2022.
Investors are reviewing the most recent round of corporate earnings to assess the impact rising costs have had upon different industries, and to determine how companies will address inflation moving forward.
Hainlin stated that technology is in high demand because companies are continuing to increase productivity, overcome supply problems and solve labor shortages. “Companies won’t do this if they are worried about the economy going into recession.”
About 40% of S&P companies have reported quarterly results this earnings season. This means that 64% of S&P companies have reported earnings and revenue that exceeded analyst expectations, according to S&P Global Market Intelligence.
Marathon Petroleum saw a 6.1% increase, and Thermo Fisher Scientific, a scientific instrument and laboratory supply company, saw a 1.7% rise after reporting strong financial results.
Wall Street was not pleased with some company earnings.
PayPal plunged 24.6% after it reported a weak quarter, subdued guidance, and its worst trading day since 2015 when it separated from eBay.
After its quarterly earnings fell short of Wall Street’s expectations, Facebook parent company Meta Platforms saw its stock plummet 21.4% after after-hours trading.
A number of large companies, including Ford and Amazon.com, will publish earnings this week.
