Dow Rebounds 500 Points, Analysts ‘Cautiously Optimistic’ After More Solid Earnings

Topline

The stock market surged Tuesday, recouping losses from the previous session, as investors cheered another round of solid quarterly earnings results from corporate America despite inflationary pressures and fears of a recession.

Key Facts

The Dow Jones Industrial Average jumped over 500 points, or 1.8%, to 31,621 points, while the S&P 500 gained 2.1% to 3,911 and the tech-heavy Nasdaq Composite 2.4% to 11,630.

Though analysts have been warning of a slowdown in corporate earnings amid recession fears, earnings for S&P 500 companies are still expected to rise—both in the current quarter and for the full-year–and second-quarter earnings reports so far have borne that out.

Shares of Johnson & Johnson rose slightly after the pharmaceutical giant reported strong quarterly earnings and revenue, though the company also slashed its full-year financial forecasts due to macroeconomic pressures.

Shares of toy-maker Hasbro rose nearly 2% after similarly beating expectations, while tech company IBM and defense giant Lockheed Martin fell over 5% and 3%, respectively, following disappointing earnings results.

Nearly 50 companies in the S&P 500 have reported second-quarter earnings so far—with roughly 90% of them beating analyst expectations, according to Refinitiv data.

What To Watch For:

This week of earnings is “among the most important of the year as it will set the stage for the next two quarters,” predicts Nationwide chief of investment research Mark Hackett, who remains “cautiously optimistic” that markets are in a bottoming pattern. Several more big companies report earnings this week, including the likes of Netflix, Tesla, United Airlines, Verizon and Twitter, among others.

Crucial Quote:

“Stocks are picking up where they left off Friday after the brief pause on Monday,” says Vital Knowledge founder Adam Crisafulli. Earnings reports this week have been “mixed (at best)” and the market “would probably be rallying regardless,” he insists, adding that decent housing starts and building permits numbers are also “helping to propel equities.”

Key Background:

Markets rebounded after declines on Monday, when the Dow fell roughly 200 points despite strong earnings from the likes of Goldman Sachs and Bank of America. “Solid earnings results from the major banks, with the exception being JPMorgan Chase, created volatile stock price reactions” in recent days, says Brian Overby, senior markets strategist at Ally Invest. “That might signal a theme during the Q2 reporting period.”

Further Reading:

Dow Falls 200 Points Despite Solid Earnings From Goldman, Bank Of America (Forbes)

Dow Jumps Over 600 Points After Strong Retail Sales, Mixed Bank Earnings (Forbes)

Dow Falls 200 Points After ‘Ugly’ Inflation Report Adds To Recession Fears (Forbes)

Wall Street Firms Slash S&P 500 Price Targets As ‘Concerned’ Analysts Warn Of Earnings Slowdown (Forbes)