The Dow Jones Industrial Average rose Wednesday as trader pored through the latest quarterly reports and weighed recent moves in interest rates.
The 30-stock Dow was up 258 points, or 0.7%. The S&P 500 was 0.2% higher and the tech-heavy Nasdaq Composite fell 0.5%.
The moves came as Netflix fell more than 36% after reporting a loss of 200,000 subscribers in the first quarter. The news led shares of streaming companies Disney, Roku, Warner Bros. Discovery and Paramount to fall, as investors worried about buying technology stocks ahead of earnings. A slew of analysts also slashed their ratings on Netflix following its first-quarter results.
Meanwhile, IBM rose more than 6% following a beat on earnings and revenue, which helped lift the Dow. Procter & Gamble, another Dow component, reported better-than-expected results and hiked its full-year revenue guidance. Its shares gained more than 2%.
“Earnings will continue to be the key catalyst, said Ross Mayfield, investment strategy analyst at Baird. “Companies so far are highlighting strong demand across industry, despite inflation and supply chain pressures. While we expect this year to continue to be volatile, earnings strength and bearish sentiment is a really nice backdrop for a near-term pop.”
Roughly 12% of S&P 500 companies have reported first-quarter earnings thus far, with 80% of those names beating analyst expectations, according to FactSet.
Tesla and United Airlines are slated to report after the bell.
Beyond company earnings, investors were also keeping a close eye on the 10-year U.S. Treasury yield, which retreated Wednesday after touching 2.94%, its highest level since late 2018, on Tuesday.
“There seems to be some fatigue around rate hike and inflation discussion,” said Sylvia Jablonski, CEO nad chief investment officer at Defiance ETFs. “The market has likely priced in the future of rate hikes, inflation is likely nearing a peak and I think there is some positive sentiment around earnings season. The consumer remains strong, spending is up regardless of sentiment, $2 trillion remains on the sidelines in savings, and corporations continue to show strength in pricing power and robust balance sheet.”
All the major averages saw strong gains on Tuesday, posting their best day since March 16. The Nasdaq Composite bounced back 2.15%, while the Dow Jones Industrial Average rose 499.51 points, or 1.45% and the S&P 500 gained 1.61%.
“Though growth may slow, this year could still be poised for a mid-digit S&P return,” Jablonski added. “Investors may be taking stock of that, and deploying cash versus locking in losses on cash due to inflation. If P/E levels continue to look reasonable at these levels, and earnings come through, this could be the catalyst for a positive second half pivot.”
