Rosalind Evans
Wall Street saw stocks advancing, contributing to the impressive streak that has propelled it to its loftiest point in over 15 months.
By midday, the S&P 500 had risen by 0.3%, fresh off its highest finish since the start of April 2022. The Dow Jones Industrial Average had climbed 129 points, or 0.4%, reaching 35,081, while the Nasdaq composite also increased by 0.4%.
Leading the market was Elevance Health, having surged by 5% after reporting more robust profit and revenue for the spring season than expected and concurrently revising its full-year earnings outlook upward.
Market-wide performance was also bolstered by a relaxed bond market, where yields were either stable or declining after announcing a greater-than-anticipated decrease in U.K. inflation to a 15-month low of 7.9% in June.
Recent promising U.S. data reports suggesting a potential deceleration of inflation have raised hopes of an impending halt to the Federal Reserve’s interest rate hikes, possibly circumventing a predicted economic recession.
High-interest rates have triggered a wave of bank failures in the U.S., as clients abruptly withdrew their support. Remaining small and mid-sized banks, under intense investor scrutiny, have started revealing their spring season results.
After reporting lower-than-expected quarterly profits, Western Alliance Bancorp bounced back from early losses to a 4.8% gain, with an additional $3.5 billion in deposits received between April and June. Meanwhile, U.S. Bancorp saw its shares rise by 4% despite weaker profits but more vital revenue and reported a 3.2% growth in deposits since the beginning of the year.
Investment bank Goldman Sachs gained 1.8% despite missing profit estimates but exceeding revenue forecasts. M&T Bank saw a 1.4% uptick after reporting more substantial profits and increased deposits.
Notable market performer Carvana soared by 37.5% after securing an agreement with its lenders to reduce its debt by over $1.2 billion and reporting a less severe net loss for the latest quarter than anticipated.
The expectations are generally low as we enter the second week of the earnings reporting season. However, this sets a lower benchmark, which is easier for companies to exceed.
Despite a steeper-than-anticipated fall in earnings per share, trucking company J.B. Hunt Transport Services saw its shares increase by 1.6%. Analysts were optimistic about the potential growth trends signalled by the company.
On the other hand, marketing and communications company Omnicom Group took a 10.6% hit after underperforming analysts’ revenue growth expectations for the spring season.
JJ Kinahan, CEO of IG North America, summed up the current market status as, “can’t stop, won’t stop.”
The S&P 500 has already skyrocketed by 19% this year, fueled mainly by a robust job market enabling the economy to withstand high-interest rates. While the initial gains were driven primarily by a small cluster of Big Tech stocks, the economic resilience and easing inflation have recently led to a broader rally.
Internationally, London’s FTSE 100 surged by 1.9% following the positive inflation data from the U.K. European and Asian markets, however, exhibited mixed performance. Hong Kong’s Hang Seng index fell by 0.3% due to a sell-off in property shares, following troubled developer China Evergrande’s announcement of a rise in its total debts to approximately $340 billion over the past two years.
In the bond market, the yield on the 10-year Treasury dropped slightly to 3.78% from 3.79%, which sets the benchmark for mortgages and other significant loans.
The upward momentum of Wall Street, spurred on by stronger-than-expected profit reports and eased inflation pressure, signifies a resilient market landscape. As the global economic climate remains fluid, the outcomes of upcoming corporate earnings and geopolitical developments will continue to steer the direction of the financial markets. Despite intermittent challenges, the perseverance of the U.S. economy and its ability to absorb high-interest rates serve as strong undercurrents to maintain this positive stride.
