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Stocks rise as earnings reporting season kicks off, Nasdaq up 1%

Stocks rise as earnings reporting season kicks off, Nasdaq up 1%

Stocks rose on Wednesday as corporate earnings season kicked off with mostly positive results, and traders looked past inflation figures for a pickup.

The Dow Jones Industrial Average rose 185 points, or 0.5%. The S&P 500 rose 0.7% and the Nasdaq Composite rose 1.5%. The moves come after the S&P 500 and Nasdaq Composite recorded their third consecutive losing session on Tuesday amid March CPI which showed the highest inflation since 1981.

BlackRock, Fastinal and Delta Air Lines all rose on the back of better-than-expected quarterly results. Delta also got a boost after the airline said it expects to return to profitability this quarter.

“Given the myriad headwinds companies faced in the first quarter and next year, we think the first-quarter reporting season is likely to be chaotic,” wrote Laurie Calvasina, head of US equity strategy at RBC. “But we also see the potential not to be as bad as feared, given the potential for the buy side outlook to be much lower than the official forecast for the sell side – as long as strong assessments of underlying appetite/demand remain.”

Shares of other travel companies rose as a group on Wednesday. American Airlines stock jumped more than 8%, Southwest Airlines jumped 6%, Expedia jumped 3.6%, and Carnival Corporation jumped nearly 5%.

Chip stocks rose with Nvidia up nearly 3%, Qualcomm jumping over 4%, and Advanced Micro Devices up nearly 3%. Micron Technology also gained 2%.

Sure enough, JPMorgan Chase shares fell 3% after the banking giant reported $524 million in damages due to market turmoil due to sanctions against Russia. The bank also posted a 42% drop in first-quarter profit. JPMorgan, however, managed to report $31.59 billion in revenue for the period, slightly more than expected by analysts.

CEO Jamie Dimon warned that the bank is building up credit buffers due to a “higher potential for downside risks” to the US economy.

Analysts generally softened expectations for this season amid rising commodity costs, the war in Ukraine and the ongoing pandemic. Earnings for S&P 500 companies are expected to increase just 4.5% in the period, the lowest growth since the pandemic-ravaged fourth quarter of 2020, according to FactSet.

“Our sense is that first-quarter results will be ‘good’ relative to expectations and management’s guidance will be more negative than positive again,” wrote Chris Senek, senior investment analyst at Wolfe Research. “As such, we do not expect earnings trends emerging from the first quarter reports to drive equity markets higher. Instead, our sense is that high inflation, Fed tightening, and heightened recession risks will continue to be the main drivers of overall market returns and rotational sector.”

Traders also looked at another set of data showing a sharp rise in prices amid growing hopes that inflationary pressures may be peaking.

A report on Wednesday showed that producer prices – wholesale costs that could eventually drive up retail prices – jumped 11.2% in March on an annual basis. The monthly gain of 1.4% beat estimates of economists polled by Dow Jones by 1.1%.

“I think the market seems to be reacting in a similar way to what it did yesterday in response to the CPI, and obviously the PPI at the 11th handle is mind-boggling, but I think the narrative of peak inflation still stands,” said Jack Applin. Co-founder of Cresset Wealth.

The 10-year Treasury yield fell to 2.68% after the producer price report. The yield touched a three-year high of 2.82% this week before pulling back.

The producer price report came on the heels of Tuesday’s consumer price gauge that showed an 8.5% increase in March, the Labor Department said Tuesday. The report raised further concerns about monetary policy tightening from the Federal Reserve, even as the core CPI excluding food and energy costs rose 0.3%, slightly below expectations. Some on Wall Street saw this as a sign that inflation might be approaching a peak.

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