Nasdaq jumps 1%, Dow climbs 370 points as Wall Street shakes off slow start to week
U.S. stocks rose on Tuesday as investors digested another round of corporate earnings and awaited key inflation data later this week.
The Dow Jones Industrial Average gained 371.65 points, or about 1.06%, to 35,462.78. The S&P 500 gained 0.84% to 4,521.54, while the Nasdaq Composite gained 1.28% to 14,194.45.
Corporate earnings were the driving force behind stock market movements on Tuesday. Harley-Davidson jumped more than 15% after the company announced a surprise fourth-quarter profit. Amgen and Chegg rose 7.8% and nearly 16%, respectively, following their quarterly updates.
Shares of American Express rose 3.3% and JPMorgan gained 1.9%, boosting the Dow Jones.
“The S&P 500 reversed losses as Wall Street turned to materials, technology and financial stocks,” Edward Moya, senior market analyst at Oanda, said in a note to clients. “Now that we are both over the hump with earnings season and investors are primed for another inflation report, the ongoing spin trade will likely continue. Today traders are finding value in technology and embracing financial services as global bond yields rise steadily.”
It was a broad rally for stocks on Tuesday, with S&P 500 winners outnumbering losers by more than 2 to 1. The small-cap Russell 2000 rose more than 1.6%.
Wall Street has been watching how the Federal Reserve will react to mounting price pressures, with many investors viewing Thursday’s consumer price index data release as a key event for markets this week. Inflation data is expected to show prices rose 0.4% in January, for a gain of 7.2% from a year ago, which would be the highest in nearly 40 years.
Treasury yields hit new pandemic-era highs on Monday and rose again on Tuesday. At its highest, the benchmark 10-year Treasury fell 1.97% on Tuesday, a level not seen since November 2019.
“It’s reasonable to expect equities to hold up ahead of Thursday’s CPI release. I think it’s encouraging to see the market absorbing the rise in long-term yields quite well,” said Angelo Kourkafas, investment strategist at Edward. Jones.
“At this point, it’s a tug of war between strong economic and corporate fundamentals and tighter monetary policy,” he added.
In contrast, Pfizer shares fell 2.8% after the drugmaker’s fourth-quarter revenue fell short of Wall Street analysts’ expectations. Pfizer’s full-year earnings forecast also disappointed.
As of Tuesday morning, about 300 components of the S&P 500 reported, with 77% beating earnings estimates and 75% beating revenue expectations, according to FactSet. However, the strong results were not enough to pull the market out of the hole created by January’s plunge, and weak forward guidance could be part of what is holding back a rebound.
“Despite a solid pace this quarter, forecasts have weakened significantly. … Forecasts are also rarer than usual – we note only 76 instances of EPS forecasts being issued in [January]slightly below last January and the lowest of all Januarys,” Bank of America’s Savita Subramanian said in a note to clients.
CVS Health, GlaxoSmithKline and Toyota are among the companies expected to report earnings later this week.
Elsewhere, shares of Peloton rose 25% after the interactive fitness company announced it would cut 2,800 jobs in a restructuring effort that will see CEO John Foley step down and take over as executive chairman. The move follows a 20.9% rise on Monday following reports that the company could be a takeover target.
Tuesday’s market moves recouped Monday’s losses for the S&P 500 and Nasdaq. All three major market averages are now positive for the week.