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U.S. Stocks Extend Rally On Upbeat Earnings News

wallstreet aug13 29jul22 lt

Stocks moved sharply higher over the course of the trading day on Friday, adding to the strong gains posted on Wednesday and Thursday. With the extended rally, the tech-heavy Nasdaq reached a nearly three-month closing high, while the Dow and the S&P 500 reached their best closing levels in well over a month.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow jumped 315.50 points or 1 percent to 32,845.13, the Nasdaq shot up 228.09 points or 1.9 percent to 12,390.69 and the S&P 500 surged 57.86 points or 1.4 percent to 4,130.29.

For the week, the Nasdaq and the S&P 500 spiked by 4.7 percent and 4.3 percent, respectively, while the narrower Dow leapt by 3.0 percent.

The three-day rally also capped off a strong month for stocks, with the major averages recording their best monthly gains since 2020.

The continued strength on Wall Street partly reflected a largely positive reaction to the latest batch of earnings news from big-name companies.

Shares of Amazon (AMZN) moved sharply higher after the online retail giant reported better than expected second quarter revenues and provided upbeat guidance.

Tech giant Apple (AAPL) also showed a strong move to the upside after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Intel (INTC) came under pressure after the semiconductor giant reported weaker than expected second quarter results and provided disappointing guidance for the current quarter.

A steep drop by Procter & Gamble (PG) also limited the upside for the Dow after the consumer products giant reported fiscal fourth quarter earnings that missed analyst estimates and forecast results for fiscal 2023 below expectations.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing an acceleration in the pace of consumer price growth.

The report showed the annual rate of growth by the personal consumption expenditures price index accelerated to 6.8 percent in June from 6.3 percent in May, showing the fastest growth since January 1982.

The annual rate of growth by core consumer prices, which exclude food and energy prices, also accelerated to 4.8 percent in June from 4.7 percent in May.

The inflation data, which is said to be preferred by the Federal Reserve, was included in a report showing personal income increased by slightly more than expected in the month of June.

Sector News

Retail stocks saw substantial strength on the upbeat earnings news from Amazon, driving the Dow Jones U.S. Retail Index up by 4.3 percent to its best closing level in almost three months.

Substantial strength was also visible among energy stocks, which surged along with the price of crude oil. Crude for September delivery pulled back off its highs but still jumped $2.20 to $98.62 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index spiked by 4.1 percent and 3.7 percent, respectively.

Energy giants Exxon Mobil (XOM) and Chevron (CVX) posted strong gains after reporting better than expected quarterly earnings.

Steel, transportation and financial also saw considerable strength on the day, while tobacco and pharmaceutical stocks bucked the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Friday. Hong Kong's Hang Seng Index plunged by 2.3 percent and Japan's Nikkei 225 Index edged down by 0.1 percent, while Australia's S&P/ASX 200 Index advanced by 0.8 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index jumped by 1.1 percent, the German DAX Index and the French CAC 40 Index surged up by 1.5 percent and 1.7 percent, respectively.

In the bond market, treasuries extended the upward trend seen over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 3.9 basis points to a new three-month closing low of 2.642 percent.

Looking Ahead

Monthly jobs data is likely to be in focus next week, while traders are also likely to keep an eye on reports on manufacturing and service sector activity and the U.S. trade deficit.

Reaction to the latest earnings news may also continue to impact trading, with a slew of well known companies due to report their quarterly results.

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