Spencer Platt
Wall Street’s major averages were higher on Wednesday, as the second quarter earnings season picked up steam. Also giving a boost was positive sentiment carrying over from European markets following a moderation in UK consumer inflation.
Market participants might refrain from big moves ahead of results from a trio of megacap technology companies after the close of trading.
The tech-heavy Nasdaq Composite (COMP.IND) rose 0.43% to 14,415.09 points, while the benchmark S&P 500 (SP500) added 0.38% to 4,572.28 points. Both indexes had posted yearly closing highs in the previous session. Meanwhile, the blue-chip Dow (DJI) was up 0.45% to 35,110.88 points.
Of the 11 S&P sectors, nine were trading in the green, led by Communication Services and Real Estate.
Treasury yields were largely unchanged. The longer-end 10-year yield (US10Y) was flat at 3.79%, while the more rate-sensitive 2-year yield (US2Y) was up 2 basis points to 4.77%.
Data earlier in the day showed that the UK consumer price index (CPI) decreased to 7.9% in June from 8.7% in May, marking the lowest level since March last year. The report was cheered by investors in Europe, and the positivity has carried over across the Atlantic.
“With regards to the UK, it has the highest inflation rate in the G7 at 8.7%, and we’ve had upside surprises in all of the last 4 CPI prints, so it’s generated more and more focus,” Deutsche Bank’s Jim Reid said. “In turn, that’s driven a big reappraisal as to how far the Bank of England will need to hike rates, whilst gilts have significantly underperformed their counterparts elsewhere this year.”
At home, the economic calendar saw June housing starts and permits come in, with both headline figures falling more than expected on a M/M basis. Additionally, MBA’s gauge of mortgage applications for the past week rose slightly, with the 30-year fixed-rate mortgage coming in at 6.87%.
“Housing is one area that has been hit by Federal Reserve policy tightening. Construction employment plateaued during the second quarter,” UBS’ Paul Donovan said.
The spotlight on Wednesday was on earnings, with traders largely shaking off Goldman Sachs’ (GS) big Q2 profit miss as it was expected. Major banks in general have turned in solid results on tempered expectations, with many seeing hefty increases in net interest income due to elevated interest rates.
Technology earnings will take centerstage after the closing bell, with chip giant IBM (IBM), electric vehicle firm Tesla (TSLA) and streaming giant Netflix (NFLX) on the deck.
Weaker “economic growth and lower inflation are set to drive a rare S&P 500 (SP500) revenues recession this reporting season,” strategist Ben Laidler said. “But this is being partly offset by some timely relief to company profit margins, as input prices have fallen faster than consumer prices. U.S. margins remain over 11%.”
Turning to active stocks, AT&T (T) was among the top percentage gainers on the S&P 500 (SP500) after it said it does not immediately plan to remove lead cables from below Lake Tahoe.
