Corporate earnings have largely beat Wall Street's expectations this season.
Angela Weiss/AFP/Getty ImagesStocks were gaining Thursday, with the Nasdaq Composite touching a record high, as economic uncertainty sent investors to the relative safety of tech shares.
in morning trading, the Dow Jones Industrial Average rose 179 points, or 0.5%, after the index fell 266 points Wednesday. The S&P 500 gained 0.8%, while the tech-heavy Nasdaq advanced 1.1%. The Nasdaq was trading above its all-time high of 15,403.44, reached on Sept. 7.
Technology stocks—among the best performers Thursday—are perceived to be able to grow even when economic growth is uncertain. And right now, economic growth is uncertain. U.S. third-quarter GDP rose 2%, missing estimates of 3.5%. It was the worst performance since the June quarter of 2020. The GDP data showed that inflation has begun eating into economic growth, wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group.
Meanwhile, initial jobless claims were 281,000, better than the expected 289,000.
That economic uncertainty is seen in the bond market, too. The 10-year Treasury yield has sunk to 1.55% from 1.7% hit a week ago, reflecting lowered expectations for inflation and economic demand for the long-term as the Federal Reserve may begin hiking interest rates in 2022. That’s also evident in the two-year Treasury yield, which had risen to 0.52% from 0.46% a week ago.
The “flattening” of the yield curve “elicited concerns that the market was pricing in a Fed policy mistake, whereby the Fed tightens conditions too quickly and kills the economic expansion,” wrote Tom Essaye, founder of Sevens Report Research.
Strong earnings reports were providing a boost for the stock market. The aggregate S&P 500 earnings per share result has beaten analyst estimates by about 12%, according to Credit Suisse. Companies beating expectations are seeing their stocks outperform the S&P 500 by 0.8 percentage points, but those missing are underperforming by 3.7 percentage points.
“Partially, earnings are driving some of the movement [in stocks] upward,” said Tony Bedikian, head of global markets at Citizens Bank.
Earnings will continue to be in the spotlight Thursday, with Big Tech heavyweights Apple (ticker: AAPL) and Amazon (AMZN) reporting results alongside Royal Dutch Shell (RDS.A), U.S. Steel (X), Comcast (CMCSA), Caterpillar (CAT), Mastercard (MA), Merck (MRK), and others.
Corporate and economic fundamentals aside, money has been ready to flow into stocks, boosting the market of late. The S&P 500 is up more than 6% from its Oct. 4 bottom after a pullback, with retail investors—those who trade stocks on popular platforms such as Robinhood—have bought the dip.
“It’s still a liquidity story that’s still being played out in the equity markets,” Bedikian said.
Overseas, Hong Kong’s Hang Seng Index was 0.4% lower, as the woes of the heavily indebted Chinese property sector remained at the fore. Embattled developer China Evergrande (3333.H.K.) faces the hard deadline for an offshore bond payment Friday. The pan-European Stoxx 600 was 0.2% higher after the European Central Bank kept policy unchanged, but indicated that it would “moderately” slow the pace of its asset-buying program.
Here are five stocks on the move Thursday:
Ford (F) shot up 9.3% after the auto maker’s earnings, late Wednesday, saw profit beat expectations. Ford also lifted its full-year profit guidance and restarted its quarterly dividend.
Altria Group (MO) stock dropped 5.1% after the company reported a profit of $1.22 a share, missing estimates of $1.26 a share, on sales of $6.8 billion, above expectations for $5.7 billion.
Mastercard (MA) stock intially gained, then dropped 0.1% after the company reported a profit of $2.37 a share, beating estimates of $2.19 a share, on sales of $4.99 billion, above expectations for $4.9 billion.
Stanley Black & Decker (SWK) stock slipped 2.3% after the company reported a profit of $2.77 a share, beating estimates of $2.47 a share, on sales of $4.3 billion, in line with expectations.
BJ’s Wholesale Club Holdings (BJ) stock fell 1.7% after getting downgraded to Neutral from Buy at Bank of America.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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October 28, 2021 at 10:48PM
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