Stocks Close Higher as Earnings Season Ramps Up

U.S. stocks and government bond yields rose Tuesday as investors parsed the latest round of earnings reports for signs that corporate profits are holding up despite inflation.

Analysts expect profits from big U.S. companies to keep growing this year even as costs rise. That has bolstered the bull case for equities at a time when investors are anxious over the Federal Reserve’s plans to raise interest rates to fight inflation.

The S&P 500 advanced 70.52 points, or 1.6%, to 4462.21. The Dow Jones Industrial Average added 499.51 points, or 1.5%, to 34911.20. The tech-heavy Nasdaq Composite gained 287.30 points, or 2.2%, to 13619.66. It was the best day in a month for all three indexes.

The gains were broad-based, with 10 of the S&P 500’s 11 sectors advancing. Only the energy group, the top-performing sector this year, declined.

Companies have been showing they can deliver earnings growth even as investors worry about tightening monetary policy, said

Craig Fehr,

investment strategist at Edward Jones.

“Any signs that we’re seeing corporate America able to navigate through that environment and still grow profits is a very, very positive driver for equities over the balance of the year,” he said. 

Travel stocks were among the day’s strong performers after a federal judge threw out the requirement that travelers in the U.S. wear masks on airplanes and other forms of mass transit.

American Airlines Group

shares rose $1.05, or 5.7%, to $19.59.

Las Vegas Sands

shares gained $1.59, or 4.3%, to $38.24.

Carnival

shares added 87 cents, or 4.6%, to $19.91.

The market is in the thick of earnings season with dozens of big U.S. companies expected to report this week. Given high inflation, investors are watching for signs of which firms are able to preserve their profits by passing higher costs along to customers through price increases.

Shares of

Johnson & Johnson

gained $5.42, or 3.1%, to $183.08 after the pharmaceutical firm beat earnings expectations.

Travelers

fell $9.06, or 4.9%, to $176.16 despite reporting higher earnings and lifting its dividend.

Netflix

NFLX -1.24%

shares fell 23% in after-hours trading as the streaming giant said it lost subscribers globally in the first quarter and expects to lose more this spring.

In bond markets, the yield on the 10-year U.S. Treasury note kept climbing. The yield on the benchmark bond rose to 2.911%, the highest settlement since December 2018, from 2.861% on Monday.

Bond yields rise as prices fall, and investors have been selling bonds on expectations of high inflation and interest-rate increases from the Federal Reserve.

“Fixed income has been a particular point of pain. This is the worst bear market in bonds we’ve seen in a generation,” said

Brian O’Reilly,

head of market strategy at Mediolanum International Funds.

Concerns about inflation—which has soared to multidecade highs—and how central banks might respond have dominated investors’ thinking for months, but so far corporate profits have held up as firms have largely managed to pass higher costs on to consumers. Investors say they are expecting earnings growth to moderate this quarter as it becomes harder for companies to continue raising prices.

“The longer prices stay high, the longer the war in Ukraine continues, the higher likelihood that something has to give. Corporations cannot continue to pass on input costs forever,” said Mr. O’Reilly. “There has to be a tipping point.”

Traders at the New York Stock Exchange on Thursday.



Photo:

Courtney Crow/Associated Press

Other stock movers included shares of

American Campus Communities,

which jumped $7.22, or 13%, to $64.80 after The Wall Street Journal reported that Blackstone is buying the student-housing owner in a deal valued at $12.8 billion.

Plug Power

shares rose $2.50, or 9.8%, to $28.05 after the alternative-energy company said it had struck a deal with

Walmart

to supply the retailer with hydrogen.

In commodity markets, Brent crude, the international oil benchmark, fell 5.2% to $107.25 a barrel. Natural gas fell 8.2%, continuing a volatile stretch for the fuel. Gold prices declined 1.4%.

Overseas, the Stoxx Europe 600 dropped 0.8%. In Asia, stock markets were mixed. The Nikkei 225 rose 0.7% as Japan’s yen fell to a 20-year low against the dollar. In Hong Kong, the Hang Seng Index fell 2.3%, dragged lower by technology firms.

Write to Will Horner at [email protected] and Karen Langley at [email protected]

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