Stock market: S&P 500 gained 0.3 percent as traders weighed earnings against inflationary risks. Anthem Inc., as well as Verizon Communications Inc., rose following better-than-expected results. Novavax Inc. plunged after a further delay in vaccine production, while Netflix Inc. fell after disappointing outlooks. Tesla Inc. will report results after the close.
S&P 500 earnings season started off with the best start in two years. In the first week, the index was up 3.6 percent. Solid corporate results helped counter concerns about high inflation, pushing stock market higher. Crypto stocks also rose, with bitcoin breaking a record high.
Bernstein Private Wealth Management’s Beata Kirr, director of investment strategies, recently told Bloomberg TV and Radio: “We are seeing an earnings season that is likely to be more volatile than previous ones.” “The past two quarters have seen earnings rise 45 percent year-over-year, compared with an expected 9 percent rise for 2022, she said.
“Now it’s still positive,” she said. “And that’s one of the fundamentals that really drives the stock market.”
Global shortages, clouds are gathering.
Despite stagflation fears receding, clouds are gathering over the economic recovery due to rising energy costs, bottlenecks in global supply chains, and reduced central bank support.
Dollar weakness continued on Wednesday as traders bet world central banks will raise interest rates to reduce price pressures before the Federal Reserve meets in January. Oil reversed losses to trade higher in New York after a drop in stocks. Base metals declined after China introduced new energy measures.
Meanwhile, congressional Democrats broke the deadlock on the president’s multibillion-dollar tax and spending package.
“Markets are testing whether businesses are able to adjust to a less aggressive Fed, less favorable tax policy, and more normal levels of economic growth,” noted Kara Murphy, chief investment officer at Kestra Investment Services. “There are concerns, but risk assets seem to have ignored those concerns for now.”