On Thursday, investors bought up beaten-down growth shares in the United States after the release of yet another round of earnings results from blue-chip firms like Tesla.
The S&P 500 finished the day near its peak after gaining 39.05 points, or 1%, to end at 3998.95. The Nasdaq Composite Index, which focuses on tech companies, gained 161.96 points, or 1.4%, to 12059.61. The D.Jones Industrial Average ended the day up 162.06 points (0.5 percent) at 32036.90 after going up and down during much of the day.
After the White House announced that Vice President Joe Biden, 79, had tested positive for Covid-19 with “extremely modest symptoms,” the benchmarks started largely lower and temporarily stuttered.
Markets are “on tender notice with regard to volatility from a number of different sources right now,” according to George Mateyo, chief investment officer at Key Private Bank.
While many industries struggled, those associated with discretionary spending and information technology saw significant gains. Investors’ concerns about the possibility of ongoing inflation, falling demand, and sluggish economic development have been detrimental to those industries this year.
After reporting better-than-expected quarterly earnings, Tesla led the S&P 500 with a $72.62 (or 9.8 percent) increase in share price, bringing the total to $815.12. However, the producer of electric vehicles posted its first quarterly loss in almost a year.
After an unsteady first half of 2022, the stock market has just leveled out, with all three main averages on track for increases this week and in July. After hearing positive earnings reports from firms like Netflix and Tesla, investors have been more willing to invest in the stock market.
According to Edward Park, chief investment officer at Brooks Macdonald, “there’s a little more confidence surrounding the growth sector than a couple of months ago.”
However, many financial experts predict next volatility will be greater. Mr. Park remarked, “The key question is whether we have a big earnings recession heading into 2023.”
A number of disheartening business announcements were made on Thursday.
After AT&T announced a reduction in its 2022 free cash flow projection, the stock price plummeted $1.56, or 7.6 percent, to $18.92. The blue-chip Dow’s poorest performer was Verizon Communications, which slid $1.41, or 2.9%, to $47.66.
Stocks of airlines saw a similar decline. United Airlines’ stock dropped $4.24, or 10%, to $37.44 after the company issued a statement warning about the impact of rising fuel costs. After reporting a profit that was lower than expected, shares of American Airlines plummeted $1.13, or 7.4 percent, to $14.08.
After Carnival said it would sell $1 billion in new stock, the industry’s shares fell. With a $1.24 (11%) drop to $9.85, Carnival was the worst performer on the S&P 500. Other notable index decliners were Royal Caribbean Group and Norwegian Cruise Line Holdings.
Overseas, the Eurozone was finally brought out of negative interest rate territory when the European Central Bank raised rates for the first time in almost a decade, and by a larger amount than had been signaled by ECB President Christine Lagarde.
Convincing investors that a new policy instrument will protect vulnerable southern European economies from the possibility of skyrocketing borrowing rates is another problem facing the European Central Bank (ECB). As prime minister, Mario Draghi left Italy particularly exposed after resigning on Thursday. Its stock market, the FTSE MIB, was negatively affected by his decision, dropping 0.7%. The pan-European Stoxx Europe 600 index increased by 0.4%.
After the increase of interest rates by the European Central Bank, the value of the dollar weakened. The dollar has been on a tear so far this year. Compared to a group of 16 other currencies, the WSJ Dollar Index (a proxy for the value of the U.S. dollar) is up 1.4% this month and 10% so far in 2016.
Some corporations’ recent profits have been hurt by the rise of the dollar. The rising value of the dollar reduces demand for U.S. exports by making American goods more expensive to foreign buyers.
Consequentially, it has acted as a drag on commodity prices, halting the current upswing in oil and metals and helping to ease inflationary pressures.
Despite concerns expressed throughout the earnings season about the state of the economy and consumers, these effects have been mitigated, according to Sanctuary Wealth’s chief investment officer, Jeff Kilburg. “The stability of the currency has helped to mitigate price increases.”
Brent oil lost $2.9% on Thursday, dropping to $103.86 a barrel. Stocks in the energy industry also fell, making it one of just two categories in the S&P 500 to finish the day in the red.
Read More: S&P 500 Rises as Investors Eye Earnings