Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 14, 2022. REUTERS/Brendan McDermid
NEW YORK (`) — Stocks surge Thursday on Wall Street after another mixed batch of earnings reports.
The S&P 500 was up 0.2 percent in midday trade after shedding most of an early 0.9 percent gain. The Dow Jones Industrial Average rose 82 points, or 0.3 percent, to 34,031 at 11:30 a.m. Eastern time, while the Nasdaq Composite was up 0.2 percent.
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Stocks have been shaky this week, swinging from gains to losses and back again amid uncertainty about where interest rates and inflation are headed. A still-strong job market has investors investing more in the Fed’s forecast that it will hike rates a few more times before keeping them high this year. High interest rates can lower inflation, but they can also increase the risk of a recession and hurt asset prices.
This diminishing disconnect between markets and the Fed could result in less volatility in markets going forward, said Thomas Martin, senior portfolio manager at Globalt Investments. But now, with a jumble of earnings reports pouring in from companies along Wall Street and questions about whether the economy can avoid a sharp recession, the volatility is likely to remain.
“There is continuing evidence that the economy is stronger than people thought it would be,” he said. “The question is how is the economy able to maintain this resilience in the face of interest rates that are much higher than a year ago.”
A red flag continues to flash, at least in the bond market, as yields on longer-dated Treasuries are well above shorter-dated Treasuries. It’s an unusual event that has often preceded recessions in the past.
“We’re still somewhere in that 40 percent to 60 percent recession range,” Martin said. “I’m not trying to dwarf it, but there are so many avenues to go. The level of uncertainty was high and remains high.”
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High inflation and worries about a slowing economy have already started to weigh on corporate earnings, and major US companies have reported relatively lackluster results for late 2022.
Disney surprised the market by reporting stronger earnings than analysts had expected for the most recent quarter. It also said it would cut about 7,000 jobs as part of a plan to reduce its costs by $5.5 billion. Its shares rose 1.6 percent after rising 5.7 percent early in the morning.
The media giant joins the growing list of high-profile companies announcing layoffs amid an uncertain economy. Most started in the tech industry, where companies admitted they misjudged the boom that resulted from the pandemic and hired too many people. In the meantime, however, the job cuts have also spread to other sectors.
Overall, however, the labor market remained robust. Last week, 196,000 US workers filed for unemployment benefits. That was slightly more than the previous week, but remained below the 200,000 mark for the fourth straight week.
While a strong job market is good for workers and for companies to sell, the Federal Reserve also fears it could put upward pressure on inflation. When employers have to pay large raises to retain and attract workers, there is concern that this could force them to raise the prices of their own products and services.
Casino operator stocks were strong on Thursday after earnings reports sparked optimism about momentum in both Las Vegas and Macau in Asia. MGM Resorts International rose 7.5 percent, while Wynn Resorts rose 4.5 percent.
PepsiCo also gained, rising 1.1 percent after reporting stronger earnings and revenue than analysts had expected for the final three months of 2022.
On the loser side was Baxter International, which slipped 12.2 percent after the healthcare company reported weaker quarterly earnings than forecast. It also gave an earnings forecast for the coming year, which fell short of Wall Street’s expectations. Baxter also announced layoffs to cut costs and said it will reduce its global workforce by less than 5 percent.
Mattel tumbled 10.4 percent after the toymaker reported a sharp decline in sales and weaker-than-expected profit for the all-important holiday quarter.
In the bond market, the yield on the 10-year Treasury fell to 3.60 percent from 3.62 percent late Wednesday. It helps set interest rates on mortgages and other loans. The two-year yield, which tends to impact expectations for Fed action, rose to 4.46% from 4.43%.
` business writers Elaine Kurtenbach and Matt Ott contributed.
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