Stocks Gain on Strong Earnings 04/14 09:50
U.S. stock indexes are tacking a bit more onto their record highs in
Wednesday morning trading after big banks kicked off a highly anticipated
earnings reporting season with profits that thundered past Wall Street's
NEW YORK (AP) -- U.S. stock indexes are tacking a bit more onto their record
highs in Wednesday morning trading after big banks kicked off a highly
anticipated earnings reporting season with profits that thundered past Wall
The S&P 500 was 0.2% higher, a day after returning to an all-time high. The
Dow Jones Industrial Average was up 188 points, or 0.6%, at 33,865, as of 10:30
a.m. Eastern time, and above its closing record of 33,800.60 set last week. The
Nasdaq composite was virtually flat after losing an earlier gain.
Companies are lining up to report how much profit they made during the first
three months of 2021, and expectations are very high. With COVID-19 vaccines
rolling out and businesses reopening, this may be the best quarter of earnings
growth for S&P 500 companies in more than a decade.
Big banks are traditionally among the first companies to report, and Goldman
Sachs, JPMorgan Chase and Wells Fargo all unveiled earnings for the first
quarter that blew past analysts' forecasts. Much of the surge was due to
expectations for a rapidly improving economy, which allowed banks to free up
reserves held in case loans went bad, as well as strong trading revenue.
The better-than-expected results didn't give all the bank stocks a uniform
pop, though. Goldman Sachs did rally 3.2%, but JPMorgan Chase fell 0.6%. Wells
Fargo was 2.7% higher, but only after swerving from an early-morning loss to a
Stocks in recent earnings seasons have been failing to get as big a bounce
as they usually do after reporting better-than-expected results. Analysts say
it's likely a result of how much stock prices have already rallied on
expectations for the strong growth. The S&P 500 has soared roughly 85% since
hitting a bottom in March 2020, even as the pandemic crunched profits for
companies through last year.
Wednesday's encouraging start to earnings season dovetails with several
reports showing the economy is kicking into a higher gear as more widespread
COVID-19 vaccinations and tremendous financial support from the U.S. government
and Federal Reserve work through the system.
The expectations for a stronger economy, though, are also leading to worries
about higher inflation. If inflation were to climb and sustain itself, it could
send bond prices tumbling, erode profits for companies and trigger volatility
across markets worldwide.
A report on Tuesday said that U.S. consumer prices rose more in March than
economists expected, but investors largely took it in stride. The Federal
Reserve has said that it expects higher inflation to be only temporary and that
it's ready to allow inflation to climb above its target level for a while
before it tries to tamp down prices by raising interest rates.
Low rates engineered by the Fed have been one of the central reasons for the
stock market's surge over the last year.
Later on Wednesday, investors may get more clues on the direction of
interest rates. Fed Chair Jerome Powell will speak in an interview at the
Economic Club of Washington at noon Eastern time, and Vice Chair Richard
Clarida will give a speech a few hours later. The Fed will also release the
latest update of its "Beige Book," which gives anecdotes about how the economy
is performing around the country.
The yield on the 10-year Treasury rose to 1.63% from 1.62% late Tuesday.
Also later on Wednesday, trading will begin for Coinbase, an exchange for
bitcoin and other digital currencies.
The Nasdaq gave a $250 reference price for shares of Coinbase Global.
Depending on how it performs, the company's market value could rival or surpass
other exchanges', such as Nasdaq or Intercontinental Exchange, the owner of the
New York Stock Exchange.
Interest in and prices for cryptocurrencies have been exploding recently as
more companies and mainstream investors get involved. Coinbase turned a profit
last year after reversing a $30.4 million loss from the year before, and it
expects growth to continue because it sees the cryptoeconomy producing "a more
fair, accessible, efficient, and transparent financial system for the internet
Energy stocks were some of the market's strongest on expectations that a
resurgent economy will burn more petroleum products. The International Energy
Agency raised its forecast for oil demand this year, up by 230,000 barrels per
day to 96.7 million.
That helped benchmark U.S. crude oil rise 3.5% to $62.29 per barrel and
Brent crude, the international standard, climb 2.3% to $65.11 per barrel.
Within the S&P 500, Occidental Petroleum was one of the top-perfoming stocks
with a gain of 5.1%. Halliburton rose 4.6%.
In European stock markets, the German DAX slipped 0.1%, and the French CAC
40 added 0.4%. The FTSE 100 in London rose 0.5%.
In Asia, Japan's Nikkei 225 shed 0.4% after government data showed February
machinery orders fell by an unexpectedly wide margin, adding to concern about
the country's recovery.
South Korea's Kospi rose 0.4%, Hong Kong's Hang Seng jumped 1.4% and stocks
in Shanghai rose 0.6.%.