S&P 500, Dow near records as earnings reports soothe investor fears

S&P 500, Dow near records as earnings reports soothe investor fears

The Dow briefly touched a record high and the S&P 500 traded close to its peak on Wednesday as investors eyed better than expected third-quarter earnings from U.S. companies.

While the Nasdaq lagged as technology stocks took a breather, the S&P’s utility sector was gaining sharply and the healthcare index rallied for a second day in a row after strong forecasts from Anthem and Abbott (ABT.N).

The Dow Jones Industrials Average (.DJI) briefly surpassed its previous record reached in mid-August, while the benchmark S&P 500 index (.SPX) at one point came within roughly five points of its early September record.

The S&P had fallen almost 6% below its record by Oct. 4 as investors worried about supply chain problems, profit margin pressures, higher wages and increasing input costs ahead of the earnings season, which kicked off last week.

And while U.S. companies were citing supply chain problems and higher costs during their earnings calls investors have been relieved so far that they seem to be able to maintain profit margins by passing on costs to customers, according to Jack Janasiewicz, strategist and portfolio manager at Natixis Investment Managers Solutions.

“Earnings are what matter and thus far what we’ve seen have actually been better than expected. Margins are actually holding up, said Janasiewicz.

“The bar was set pretty low coming into (earnings season) so that makes things a little easier … Things are coming out, so far, better than expected. That’s putting upward pressure on stocks.”

With just about 14% of S&P 500 third-quarter reports in, analysts were expecting earnings for the benchmark index to rise 33% from the year-ago quarter. More than 85% of those who reported beat expectations, according to the latest data from Refinitiv.

By 2:49PM ET, the Dow Jones Industrial Average (.DJI) rose 148.19 points, or 0.42%, to 35,605.5, the S&P 500 (.SPX) gained 15.13 points, or 0.33%, to 4,534.76 and the Nasdaq Composite (.IXIC) dropped 13.52 points, or 0.09%, to 15,115.57.

Eight of the eleven major S&P 500 sector indexes were trading higher, led by healthcare stocks (.SPXHC),up 1.6%, and utilities (.SPLRCU), up 1.5%, while technology shares (.SPLRCT) were down 0.3% after rallying for the previous five sessions.

The S&P 500 Value index (.IVX), which houses economically-sensitive stocks like energy and industrials, hit a fresh record, as investors eyed robust economic growth.

Anthem Inc (ANTM.N) was up 6.6% after raising its full-year earnings forecasts. However, Biogen Inc (BIIB.O) was down slightly as it reported a much smaller-than-expected quarterly sales of its Alzheimer’s drug while it raised its full year earnings forecast.

Netflix’s (NFLX.O) global sensation “Squid Game” helped lure more customers than expected, the world’s largest streaming service said as it predicted a packed lineup would further boost signups through the end of the year.

Its shares, however, were down 1.9% after hitting a record high earlier this month and gaining 18.2% so far this year.

Tesla Inc (TSLA.O) was barely higher ahead of its quarterly results, with costs and margins in focus amid chip shortages and supply chain issues.

The CBOE volatility index (.VIX), also known as Wall Street’s fear gauge, fell to its lowest level since Aug. 13.

Verizon Communications Inc (VZ.N) gained 2.4% as it added more postpaid phone subscribers than expected in the third quarter, while Baker Hughes Co (BKR.N) was down 5.9% as its profit missed expectations.

Advancing issues outnumbered declining ones on the NYSE by a 2.17-to-1 ratio; on Nasdaq, a 1.36-to-1 ratio favored advancers.

The S&P 500 posted 59 new 52-week highs and no new lows; the Nasdaq Composite recorded 90 new highs and 34 new lows.

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