Stock rally extends as US companies report solid profits

Stocks are up on Wall Street as the market continues to regain more ground it lost in a few weeks of trading.

The S&P 500 climbed 49 points, or 1.3%, to 3,427 as of 10:58 Eastern Time. The Dow Jones Industrials added 1.4% and the tech-heavy Nasdaq also gained 1.4%. Major indices also registered significant gains at the start of the week on the back of better-than-expected corporate earnings.

Despite bearish fears, investors are taking heart in solid corporate profits as earnings season warms up and companies head into the prime holiday shopping season.

“While it is still very early in the third quarter, the results are coming in decently (definitely better than anticipated). [Management] Teams are acknowledging some storm clouds on the horizon, but the operating environment is not nearly as bad as the Category 4 storm many had feared a few weeks ago,” Adam Chrisfuli of Vital Knowledge said in a report. .

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Johnson & Johnson, which brings in nearly half of its sales from outside the US, beat third-quarter expectations but lowered its 2022 forecast range as the dollar strengthened. Shares were up 1.7% before the bell.

Goldman Sachs posted quarterly earnings of $3.07 billion, easily beating Wall Street’s expectations and shares were up nearly 3%.

Netflix and United Airlines reported earnings after the closing bell on Tuesday. Tesla, American Airlines and a pair of major railroads are in the middle of a contested union vote on a new contract after earnings Thursday.

The euro fell from 98.41 cents to 98.31 cents. For the first time in 20 years, the dollar is worth more than the euro.

Elsewhere, a release of China’s most recent economic growth data due for Tuesday was postponed, removing a factor that was expected to drive trade. No specific reason was given, but the GDP report may contrast with the confident tone of the Communist Party Congress to be held in Beijing.

Economists say the world’s No. 2 economy could shrink by as little as 3% in the latest quarter, barely half of the official 5.5% target.

While the data was unlikely to “paint a particularly positive picture of the Chinese economy”, ING Economics said in a report, “the delay suggests that the government believes the that the 20th Party Congress is the most important. Happening in China right now and would like to avoid other information flows that can create mixed messages.”

Will the rally go on?

Despite the rally in stocks, many Wall Street analysts remain cautious as the Federal Reserve continues to hike interest rates to stave off the hottest inflation in 40 years.

“We do not believe the conditions are in for a continued rally, and the risk-reward is unfavorable for the markets over the next three to six months,” said Mark Heifel, chief investment officer at UBS Global Wealth Management. in a note.

“Major central banks are likely to keep rates tight until the first quarter of 2023; economic growth likely to slow at the start of the new year; and global financial markets remain vulnerable to stress while monetary policy tightens ,” said Heffel. ,

Wall Street indices are down significantly since the beginning of this year. The S&P 500 and Russell are down more than 22%, while the Nasdaq is down more than 31%. The Dow is up about 17%.

Investors worry that inflation is increasing recession risk as the Federal Reserve and other central banks raise interest rates to cushion rising prices.

The latest round of corporate financial results can help give investors a clearer picture of how companies and consumers are handling inflation.

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Other big names earning this week include American Airlines, Union Pacific and American Express.

In energy trading, US benchmark crude oil was up 12 cents at $85.34 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, it fell by 15 cents to $85.46 a barrel.

Brent crude, the base for international oil pricing, was essentially unchanged at $91.17 a barrel.

The S&P 500 rose 2.6% and the Dow Jones Industrial Average rose 1.9% on Monday. The Nasdaq rose 3.4%, while the Russell 2000 Index gained 3.2%.

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