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Stocks Rise as Corporate Earnings Again Defy Expectations Stocks Rise as Corporate Earnings Again Beat Expectations
(about 4 hours later)
Stock markets rallied for a second day on Tuesday, recording another jump as bond yields edged lower after a batch of better-than-expected earnings reports from big companies. Stocks rose for a second day on Tuesday, recording a small gain after a batch of better-than-expected earnings reports from big companies.
The S&P 500 rose roughly 1 percent in midday trading, extending a 2.7 percent gain on Monday and pushing the index further into positive territory for the month. The S&P 500 rose 1.1 percent, adding to a 2.7 percent gain on Monday and pushing the index further into positive territory for the month.
Investors are watching companies that are reporting earnings this quarter to get a sense of how they are faring as worries grow about persistent inflation and a potential recession. Wild swings in markets in recent weeks have come as the Federal Reserve’s efforts to tame inflation have proved difficult, which has bolstered the possibility of another large increase in interest rates when the central bank’s policymakers next meet, in early November. Investors are watching companies that are reporting earnings this quarter to get a sense of how they are faring as worries grow about persistent inflation and a potential recession. Goldman Sachs, Johnson & Johnson and Lockheed Martin reported quarterly profits that beat analysts’ expectations on Tuesday, a day after Bank of America, Charles Schwab and other bellwether firms reported surprisingly robust results. That was partly because forecasts had been lowered, given the economic jitters: Goldman’s third-quarter profit fell more than 40 percent from a year earlier.
Goldman Sachs, Johnson & Johnson and Lockheed Martin reported quarterly profits that beat analysts’ expectations on Tuesday, a day after Bank of America, Charles Schwab and other bellwether firms reported surprisingly robust results. In part, that was because forecasts had been lowered, given the economic jitters: Goldman’s third-quarter profit fell more than 40 percent from a year earlier. The KBW Bank index, which tracks big banks, rose about 1.1 percent on Tuesday. The index is up 2.6 percent since Thursday, right before major banks began to report earnings. Still, the index is down about 23 percent since the beginning of the year.
Some analysts have cautioned against reading into the market gains, describing them as “bear market rallies” that will eventually give way to more selling. Even after big gains in three of the past four trading sessions, the S&P 500 is down more than 20 percent this year. Some analysts have cautioned against reading into the market gains, describing them as “bear market rallies” that will eventually give way to more selling. Even after big gains in three of the past four trading sessions, the S&P 500 is down more than 20 percent this year, the threshold for a bear market.
“We do not believe the conditions are in place for a sustained rally,” Mark Haefele, the chief investment officer at UBS Global Wealth Management, said in an email. “Economic growth will likely continue to slow into the start of the new year.” “When you have bad news day after day and the market’s been down day after day, people will hang on to any good news they get and magnify it,” said Ed Cofrancesco, the chief executive of International Assets Advisory.
A survey of fund managers by Bank of America said the market may be poised for another bear market rally if U.S. Treasury yields, a benchmark for borrowing costs, stayed under 4 percent. The U.S. 10-year Treasury note fell just below that yield on Tuesday and the two-year fell to 4.4 percent. Yields move inversely to prices. A survey of fund managers by Bank of America said the market might be poised for another bear market rally if U.S. Treasury yields, a benchmark for borrowing costs, stayed under 4 percent. The yield on the 10-year Treasury note fell just below that level on Tuesday and the two-year fell to 4.4 percent. Yields move inversely to prices.
Elsewhere, London’s FTSE 100 closed 0.2 percent higher, adding to Monday’s gains after Jeremy Hunt, the new chancellor of the Exchequer, upended Prime Minister Liz Truss’s tax cut plan. In Europe, the Stoxx 600 rose 0.3 percent, Hong Kong’s Hang Seng closed with gains of 1.8 percent and Tokyo’s Nikkei 225 was up 1.4 percent. The swings in markets have come as the Federal Reserve’s efforts to tame inflation have proved difficult, which has made another large increase in interest rates all but certain when the central bank’s policymakers next meet in early November. Central bankers were previously expected to discuss slowing the interest rate increases in November, but inflation data that have come in worse than anticipated makes it likely that any pivot won’t happen until later in the year.
The price of West Texas Intermediate crude oil, the U.S. benchmark, fell 3.5 percent to about $82 a barrel on Tuesday. The price of Brent crude, the global benchmark, fell 2.7 percent, to nearly $89 a barrel. The uncertainty around the Fed’s path for rates later this year and next, and the outlook for the economy, mean stocks could remain unsteady for some time.
In currency markets, the pound fell 0.4 percent versus the dollar, to $1.13. The yen, which slid to its weakest level since July 1990 on Monday, gained 0.1 percent against the dollar. “We do not believe the conditions are in place for a sustained rally,” Mark Haefele, the chief investment officer at UBS Global Wealth Management, said in an email. “Economic growth will likely continue to slow into the start of the new year.”Elsewhere, London’s FTSE 100 closed 0.2 percent higher, adding to Monday’s gains after Jeremy Hunt, the new chancellor of the Exchequer, upended Prime Minister Liz Truss’s tax cut plan. In Europe, the Stoxx 600 rose 0.3 percent, Hong Kong’s Hang Seng closed with gains of 1.8 percent and Tokyo’s Nikkei 225 was up 1.4 percent.