Wall Street climbs after profits at big companies top forecasts
Verizon jumped 7% after saying it increased its number of broadband subscribers by 20% and earned more than analysts expected during the summer.
Wall Street climbs after profits at big companies top forecasts
STAN CHOEWall Street is rising Tuesday after Verizon, General Electric and other big companies reported fatter profits for the summer than expected.
The S tandard
& P oor's
500 was 0.5% higher in early trading and on track to break a five-day losing streak. The Dow Jones industrial average was up 165 points, or 0.5%, as of 9:45 a.m. Eastern time
, and the Nasdaq composite was 0.7% higher.
Verizon jumped 7% after saying it increased its number of broadband subscribers by 20% and earned more than analysts expected during the summer.
General Electric gained 4.6% after delivering better-than-expected earnings in part because of strength in its aerospace business. Coca-Cola rose 2.6% after it said growth in Mexico, India and other markets helped drive it to better profit during the summer than analysts expected. It also raised its profit forecast for the full year of 2023.
The pace is picking up for companies to report their results for the summer, with more than 30% of companies in the S&P 500 on the schedule for this week. The broad hope is for S&P 500 companies to report the first growth in earnings per share in a year. California congressman offers bill to allow striking workers to collect unemployment pay
Such strength is crucial for the stock market to stabilize. Its been mostly struggling since the summer under the weight of much higher yields in the bond market.
The 10-year Treasury yield has been rising rapidly from less than 3.50% in the spring and catching up with the Federal Reserves main overnight interest rate, which is at its highest level since 2001. The Fed has yanked its federal funds rate above 5.25% in hopes of starving high inflation of its fuel, and its indicated plans to hold the rate at a high level for a while.
High yields hurt prices for stocks, cryptocurrencies and other investments. They also slow the economy bluntly and add stress for the entire financial system.
But the 10-year Treasury yield was holding relatively steady Tuesday after it briefly topped 5.02% the day before. The 10-year yield was at 4.88%, up from 4.85% late Monday.
Some investors have recently begun saying yields may not have much higher to go. Column: The economy has been strong. Why are economists so eager to predict it will tank?
From here, our view is that we are now close to the peak in yields, said Solita Marcelli, chief investment officer Americas of UBS Global Wealth Management.
She said that if yields were to move much higher at a quick pace, it would risk hurting the Treasury market and shake the financial systems stability. She said the Federal Reserve would likely step in to help the market like it did in March when high interest rates helped cause three high-profile collapses of U.S. banks.
To be sure, even if overnight interest rates and Treasury yields climb no further, theyre still high enough that some investors are worried theyll eventually drag the economy into a recession if the Fed holds pat.
Until now, the overall economy has remained remarkably resilient in the face of much higher interest rates. A solid job market and spending by U.S. households has helped keep the economy chugging along.
Strong recent reports have driven expectations for the U.S. economys growth in the third quarter of the year sharply higher. Economists at Goldman Sachs, for example, have raised their forecast for the quarters growth to 4.6% from just 1.5% in mid-August. Slower economic growth may be needed to conquer stubbornly high inflation, Fed Chair Powell says
While such strength has prevented a recession, it could also be giving inflation fuel and encouraging the Fed to keep rates high for longer. That in turn could lead to more weakness in the future.
Some warning signals are also lying within the strong run of corporate profit reports.
General Motors, for example, said it made more during the summer than analysts had forecast. But it also warned that strikes by its unionized workers are expected to cut pretax earnings by $800 million this year, and another $200 million per week after that.
GM slipped 0.2%.
In stock markets abroad, indexes were mixed across Europe and Asia.
Stocks in Shanghai added 0.8% after trading near their lowest levels in several years on worries about a slump in the property market and a slowing economy.
In the oil market, prices fell again to take some more pressure off inflation. A barrel of benchmark U.S. oil slipped 0.8% to $84.78. Brent crude, the international standard, fell 0.6%, to $89.26.
U.S. oil had been above $93 last month, and it's bounced up and down since then amid concerns that the latest Hamas-Israel war could lead to disruptions in supplies from Iran or other big oil-producing countries.AP Business W writers Yuri Kageyama and Matt Ott contributed to this report.
