S&P 500 reverses gains despite strong earnings, Treasury yields remain elevated

US stocks traded mixed at midday Thursday, reversing some of their gains for the week while the third-quarter earnings season got off to a strong start and Treasury yields built on multiyear highs.

How are stocks trading
  • S&P 500 SPX,
    was off 2 points, or less than 0.1%, to 3,692.

  • Dow Jones Industrial Average DJIA,
    + 0.06%
    advanced 81 points, or 0.3%, to 30,505.

  • Nasdaq Composite COMP,
    + 2.20%
    gained 28 points, or 0.3%, to 10,706.

All three major indexes have recorded robust gains for the week despite finishing lower on Wednesday. The Dow is up 3.6%, while the S&P 500 has gained 3.8%, and the Nasdaq risen 4.8%, leaving all three on track for their best week in more than a month.

What’s driving markets

After falling in premarket trade in reaction to a jump in US Treasury yields, stocks recovered some ground as investors cheered stronger-than-expected quarterly earnings while the 10-year yield TMUBMUSD10Y,
rose to 4.179%.

Investors received strong results from AT&T T,
+ 7.43%
International Business Machines IBM, Dow Inc. DOW, United Airlines Holdings UAL and others.

On the downside, Tesla TSLA,
shares dropped after the electric vehicle maker said Wednesday evening it expects to miss its 2022 deliveries target. The company also posted a quarterly revenue that missed analyst expectations. Shares were off 3.8% in recent trade.

According to FactSet, 90 out of 503 S&P 500 firms have reported earnings so far, with 74.4% of them reporting a positive surprise.

Heading into earnings reporting season, investors were bracing for bad news after FedEx Corp. FDX,
withdrew its guidance and called for much lower profit and revenue, but the companies that have reported so far have managed to outperform these low expectations, said Art Hogan, chief market strategist at B.Reily Wealth.

“We had expectations for a disaster in earnings, and that expectation hasn’t met reality,” Hogan said. “We haven’t had a single household name that has disappointed. There hasn’t been one standout where you can say ‘this is a the tell’, ”Hogan said.

If it’s: Stocks are attempting a bounce as earnings season begins. Here’s what it will take for the gains to stick.

Next week will be one of the busiest for corporate earnings this season as investors will receive results from Apple AAPL,
+ 0.30%,
GOOG Alphabet,
+ 1.01%
and Amazon AMZN,
+ 1.03%,
among other firms. 165 S&P 500 index companies are expected to report next week, compared with just 66 this week, according to FactSet.

Investors received a weekly update on the number of Americans applying for jobless benefits on Thursday. The data showed new applications for benefits fell by 12,000 in mid-October to a three-week low of 214,000, as more people who couldn’t work after Hurricane Ian returned to their jobs.

October Philadelphia Fed manufacturing index for October remained in contraction territory, with a reading of -8.7, lower than expectations for -5. That’s compared with -9.9 last month.

Finally, US existing-home sales fell 1.5% to a seasonally adjusted annual rate of 4.71 million in September, the National Association of Realtors said Wednesday. This is the eighth straight monthly decline, a first since 2007.

In the UK, British Prime Minister Liz Truss’s decision to resign helped to push the British pound GBPUSD higher against the dollar. The British currency was up 1% against the buck in recent trade at $ 1.13, while the ICE US Dollar Index DXY, a gauge of the greenback’s strength against a basket of rivals, was down 0.5% at 112.98. “Certainly the UK news has been top of mind,” said Joe Saluzzi, co-head of equity trading at Themis Trading. “But if you back and look at the dollar chart for the last year, when the dollar’s up, stocks are down and vice versa.”

Companies in focus
  • Freeport-McMoRan Inc.
    + 3.78%
    shares rallied after the mining company reported its quarterly earnings.

  • Shares of AT&T Inc.
    + 7.43%
    were up more than 9% after the telecommunications company topped profit expectations

  • American Airlines Group Inc.
    shares were up, lifted by the company’s third-quarter results and robust fourth-quarter guidance.

Jamie Chisholm contributed reporting


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