Wall Street experienced a robust surge in trading on Tuesday, driven by a flurry of impressive corporate earnings and optimistic forecasts, rejuvenating investor confidence and triggering a widespread market rally.
All three major U.S. stock indexes displayed notable gains, with large-cap stocks sensitive to interest rate fluctuations playing a pivotal role in bolstering the overall performance. Benchmark Treasury yields remained stable, comfortably below their recent high of 5%.
The third-quarter earnings season has kicked into high gear, with this week anticipating reports from nearly a third of the companies listed on the S&P 500.
Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta, commented on the current earnings season, stating, “The earnings season is now reaching its peak, with about a third of the companies reporting this week. Prior to yesterday and today, the earnings reports were somewhat disappointing. These past couple of days, we have witnessed more encouraging and favorable earnings.”
Indeed, among the 118 S&P 500 companies that have reported earnings so far, an impressive 81% have exceeded analysts’ expectations, according to LSEG data.
The Dow Jones Industrial Average climbed 204.97 points, or 0.62%, to reach 33,141.38, the S&P 500 registered a gain of 30.64 points, or 0.73%, closing at 4,247.68, and the Nasdaq Composite added 121.55 points, or 0.93%, to finish at 13,139.88.
Within the 11 major sectors comprising the S&P 500, the utilities sector experienced the most significant increase, while the energy sector was the lone decliner, affected by a decline in crude oil prices.
Verizon (NYSE: VZ) outshone, surging by 9.3% after revising its annual free cash flow projection. Meanwhile, General Electric (NYSE: GE) achieved a 6.5% increase following the company’s upward adjustment of its full-year profit forecast.
Coca-Cola (NYSE: KO) raised its annual sales outlook, contributing to a 2.9% increase in its stock price. 3M also witnessed a notable rise, with its stock surging by 5.3%, driven by an optimistic quarterly report.
Aerospace company RTX demonstrated impressive growth, with its stock climbing by 7.2% after exceeding market expectations with its quarterly results.
On the economic front, business activity in the United States has shown improvement this month, as indicated by S&P Global’s advance “flash” Purchasing Managers’ Index (PMI).
Describing the PMI report as a “goldilocks” scenario, Martin remarked, “It’s generally a positive report,” with pricing pressures moderating and employment holding at an “acceptable” level.
Later this week, the Commerce Department is scheduled to release its initial assessment of third-quarter GDP, expected to exhibit a robust acceleration, increasing from 2.1% in the second quarter to 4.3%.
Following this, on Friday, the Commerce Department is anticipated to release its widely-watched Personal Consumption Expenditures (PCE) report. Analysts expect this report to provide further evidence of a gradual easing of inflation towards the Federal Reserve’s annual target rate of 2%.
Bill Merz, Head of Capital Market Research at U.S. Bank Wealth Management in Minneapolis, posed the question, “Can the Fed successfully manage inflation to a tolerable level before significant challenges emerge for the U.S. consumer?” He added that if this goal is achieved, the likelihood of the U.S. economy avoiding a recession will increase.
Microsoft Corp (NASDAQ: MSFT) reported post-market gains after surpassing quarterly revenue estimates, while Alphabet Inc (NASDAQ: GOOGL) experienced a decline in after-hours trading, despite exceeding revenue expectations.
