Stocks increase profits at the start of the season: markets end



(Bloomberg) – The stock market has headed for its best day since March, as better-than-expected corporate earnings and economic data outweighed fears that inflationary pressures and supply chain grunts do not hinder growth.

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All the major groups in the S&P 500 made progress. The KBW Bank Index – which jumped nearly 40% in 2021 – rose as the results of some of the largest financial institutions beat Wall Street estimates. UnitedHealth Group Inc. led the Dow Jones Industrial Average gains as the healthcare giant raised its outlook for the year, while chipmakers climbed on a bullish forecast from Taiwan Semiconductor Manufacturing Co.

Corporate profits have been a boon to the stock market throughout the pandemic. Since March 2020, the S&P 500 has risen quarterly, advancing 4% on average over the six-week period. Pent-up demand is expected to drive revenue growth, while pricing power and operating leverage should help offset inflationary pressures, according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

“Even though there are cost pressures and supply issues, the other side is that the business is strong,” said Kevin Caron, senior portfolio manager at Washington Crossing Advisors. “To the extent that producers can pass higher prices on to consumers – which they appear to be able to do – we are seeing greater profits, which is helping to boost inventories.”

U.S. state unemployment claims have fallen to their lowest since March 2020, showing employers are clinging to their workers in a tight labor market. Prices paid to US producers rose at the slowest pace of the year amid falling service costs.

Read: Fed’s bullard sees 50% chance that high inflation will persist in US

Some highlights of the company:

  • Bank of America Corp. exceeded profit expectations as fees rose in its bargaining unit. Wells Fargo & Co.’s earnings exceeded estimates, but expenses were higher than expected and loans fell. Morgan Stanley investment bankers had their best quarter ever, boosted by a breakneck pace of trading. Citigroup Inc.’s stock trading income jumped 40%.

  • Walgreens Boots Alliance Inc. profits and sales exceeded estimates as the pandemic and the vaccination campaign continued to have a powerful effect on the pharmacy giant’s bottom line.

  • Beyond Meat Inc. surged as McDonald’s Corp. will begin testing a hamburger that includes a patty developed by the manufacturer of vegetable protein products.

Read: Traders move all in on Fed hike in 2022 as short bets on futures rise

Here are some events to watch this week:

  • Goldman Sachs Group Inc. Reports Results Friday

  • US Business Inventories, University of Michigan Consumer Sentiment, Friday Retail Sales

For more market analysis, read our MLIV blog.

Some of the main movements in the markets:

Actions

  • The S&P 500 rose 1.6% at 12:31 p.m. New York time

  • The Nasdaq 100 rose 1.8%

  • The Dow Jones Industrial Average rose 1.5%

  • The MSCI World index rose 1.3%

Currencies

  • The Bloomberg Dollar Spot Index changed little

  • The euro was little changed at $ 1.1592

  • The British pound rose 0.2% to $ 1.3687

  • The Japanese yen fell 0.3% to 113.56 per dollar

Obligations

  • The yield on 10-year treasury bills fell three basis points to 1.51%

  • German 10-year yield fell six basis points to -0.19%

  • UK 10-year yield fell five basis points to 1.04%

Merchandise

  • West Texas Intermediate crude rose 0.7% to $ 80.99 a barrel

  • Gold futures rose 0.2% to $ 1,798.10 an ounce

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