Shares rose Wednesday as corporate earnings begin with positive results, and traders are looking at rising inflation rates in the past.
The Dow Jones Industrial Average rose 185 points, or 0.5%. The S&P 500 was up 0.7% and the Nasdaq Composite was up 1.5%. The move comes after the S&P 500 and Nasdaq Composite posted their third consecutive loss session Tuesday in mid-March CPI showing the highest inflation since 1981.
BlackRock, Fastenal and Delta Air Lines all traded higher after the quarterly results were much better than expected. Delta regained momentum after the airline said it expected to return to profits this quarter.
"Given the sheer number of winds the companies are facing in the first quarter and next year, we think the 1Q reporting season has the potential to be chaotic," wrote Lori Calvasina, head of US equity strategy at RBC. "But we also see that it may not be as bad as it sounds, given the likelihood that sales expectations are much lower than official sales forecasts - as long as rigorous testing for basic food needs remains."
Other travel stocks rose as a group following Delta's high forecast, which indicated that buyers would continue to fly this year despite rising inflation. American Airlines increased more than 8%, Southwest Airlines exceeded 6%, Expedia 3.6% and Carnival Corporation more than 5%.
Chip shares skyrocketed when Nvidia merged by about 3%, Qualcomm jumped by more than 4%, and Advanced Micro Devices increased by about 3%. Micron Technology also received 2%.
To be sure, JPMorgan Chase shares fell 3% after a bank robber reported a $ 524 million crash caused by a market crash due to sanctions against Russia. The bank also reduced interest rates by 42%. JPMorgan was able, however, to report $ 31.59 billion at the time, slightly higher than analysts expected.
Chief executive Jamie Dimon has warned that the bank is making loans because of "high risk" in the US economy.
Meanwhile, PayPal shares have dropped by almost 4% following an announcement from Walmart, which on Tuesday hired PayPal CEO John Rainey as its new chief financial officer.
Analysts as a whole have diminished expectations for the season amid rising property costs, the Ukrainian war and the ongoing epidemic. S&P 500 corporate profits are expected to increase by only 4.5% over the period, the lowest growth since the fourth quarter of the epidemic by 2020, according to FactSet.
"Our idea is that 1Q results will be 'OK' compared to what is expected and management management will be worse than good too," wrote Chris Senyek, chief investment strategist at Wolfe Research. “Therefore, we do not expect the revenue generated from 1Q reports to boost stock markets. Instead, our view is that high inflation, the Fed's resilience, and the growing risks of recession will remain key drivers of market recovery and industry fluctuations. "
Traders also look at more than one set of data showing a sharp increase in prices amid growing expectations that inflationary pressures may be high.
On Wednesday, a report showed producer prices - wholesale costs that could ultimately lead to higher retail prices - exceeded a record 11.2% in March each year. A monthly profit of 1.4% exceeded 1.1% of the economists voted for by Dow Jones.
"I think the market seems to be reacting in the same way as yesterday in response to the consumer price index, obviously the PPI at 11 handle to me is surprising, but I think the high inflation rate is still holding," said Jack Ablin. , the founding partner of Cresset Wealth.
Treasury's 10-year yield has dropped to 2.68% following a producer report. The yield affected a three-year high of 2.82% this week before the decline.
The producer price index follows a consumer price index released on Tuesday which showed an 8.5% increase in March, the Department of Labor said on Tuesday. The report further raised further concerns over tight fiscal policy from the Federal Reserve, as the main CPI without food and energy expenditure increased by 0.3%, slightly below expectations. Some on Wall Street have seen this as a sign that inflation is likely to rise.
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