Stocks rise on the back of strong earnings

Traders work on the floor of the New York Stock Exchange (NYSE) on January 18, 2022 in New York City.
Spencer Platt | Getty Images

The major averages rose for the first time in four days on Wednesday as several strong earnings reports lifted sentiment on Wall Street.

The Dow Jones Industrial Average rose about 50 points, helped by a 4% jump in Procter & Gamble’s stock. The S&P 500 was up 0.5%. The technology-focused Nasdaq Composite added 0.9%.

Stocks were boosted by a slew of strong corporate earnings results. Bank of America beat Wall Street estimates as it released pandemic-related loan loss reserves. Shares rebounded 4%, a day after sliding 3.4%.

Morgan Stanley saw its stock rise 3.2% after the bank’s fourth-quarter profit topped estimates. It also experienced a 13% jump in equities trading revenue.

Procter & Gamble shares popped 4% after the consumer giant reported fiscal second-quarter earnings and revenue that topped Wall Street’s expectations. The company raised its outlook for sales growth.

Earnings season is picking up on Wall Street and so far the majority of companies have surpassed analyst expectations. Of the 44 S&P 500 companies that have reported quarterly results, nearly 73% have topped Wall Street’s expectations, according to FactSet.

On the negative side, home builders also were broadly lower following after KeyBanc downgraded the group on concerns over looming interest rate hikes that will drive up borrowing costs. KB Home lost 1.7%, Lennar fell 1.6% and D.R. Horton fell 1.7%.

Shares of Sony tumbled 3.8% the day after Microsoft said it is buying video game publisher Activision Blizzard for nearly $69 billion. Sony’s PlayStation competes with Microsoft’s Xbox consoles. The drop in Sony’s stock comes after shares slid 7.2% on Tuesday.

Equities moved higher Wednesday even though government bond yields again were slightly higher, with the 2-year note rising to 1.06% and the benchmark 10-year Treasury near 1.85%, topping its highest level in 2 years that was hit on Tuesday.

Surging bond yields spurred the sell-off in stocks on Tuesday. The 2-year Treasury rate — which reflect short-term interest rate expectations — topped 1% for the first time in two years.

On Tuesday, the Dow Jones Industrial Average lost more than 540 points, dragged down by a 7% drop in Goldman Sachs. The Wall Street bank missed analysts’ expectations for earnings as operating expenses surged 23%. Its shares recovered slightly on Wednesday.

The S&P 500 declined 1.8% on Tuesday. The Nasdaq Composite, full of interest rate sensitive technology stocks, was the relative underperformer, dipping 2.6%. The Nasdaq closed at its lowest level in three months as investors feared how quickly the Federal Reserve will hike interest rates.

The move, which comes after a market holiday in the U.S. Monday, indicated that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve.

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