Dow rises 285 points for 2nd straight daily gain as focus shifts away from growth worries to earnings season

traders
Stocks are on the mend following pullbacks from record highs.

  • The Dow Jones Industrial Average climbed 285 points to extend a relief rally on Wednesday.
  • The S&P 500 also rose and the Nasdaq Composite pushed through early weakness.
  • Johnson & Johnson was among the Dow stocks that raised its annual earnings guidance.
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US stocks closed higher Wednesday, led by blue-chips as many corporate behemoths upgraded financial guidance, though questions linger about global economic recovery as COVID-19 infections rise.

The Nasdaq Composite overcame earlier weakness while the Dow Jones Industrial Average soared 285 points to advance for a second straight day of gains. The Dow was helped by shares of Coca-Cola, Johnson & Johnson and Verizon which rose after each company raised their financial guidance and posted quarterly results that beat analyst expectations.

Stocks extended Tuesday’s rebound from a rout in the previous session that was triggered by reports about mounting coronavirus cases worldwide. Retail investors buying the dip in shares on Monday purchased a record $2.2 billion of equities.

Wednesday’s “trade is a natural reaction to such a violent move on Friday and on Monday… but I’d steer clear of drawing any conclusions that say in today’s trading, “All is well,” Keith Buchanan, senior portfolio manager at Globalt Investments, told Insider. “We still have to see a lot more from a data perspective to reassure this market that the reopening and progress towards the new normal of economic conditions and consumer behavior are still on track.”

Here’s where US indexes stood at 4:00 p.m. on Wednesday:

Investors have been skittish about COVID-related developments, including a stall in vaccination rates in the US while the highly transmissible Delta variant of the coronavirus is responsible for an estimated 83% of all new cases, according to the Centers for Disease Control and Prevention.

Also key for the direction of markets is the outlook on inflation given that consumer and wholesales prices have shot up to multi-year highs.

“It’s paramount that investors have a clear understanding of what corporations are dealing with from a supply-shortage standpoint and how that’s developing, what they’re having to pay in order to get their products out to market,” and other cost factors including labor and whether they can pass price increases to their customers, said Buchanan.

Around the markets, Cathie Wood has added to her bitcoin exposure with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday. Meanwhile, legendary investor Jeremy Grantham said the stock and cryptocurrency markets are in bubbles worse than in 2000.

Ulta will open mini-shops at 100 Target stores next month, the biggest cosmetics retailer in the US said Wednesday.

JPMorgan Chase handed Jamie Dimon a stock award potentially worth millions if he stays CEO for at least five more years.

Gold slipped by 0.3%, to $1,804.30 per ounce. Long-dated US Treasury yields edged up, with the 10-year yield at 1.28%.

Oil prices jumped, pushing past weekly US data showing an unexpected climb of 2.1 million barrels in crude supplies. West Texas Intermediate crude rose 4.3%, to $70.31 per barrel. Brent crude, oil’s international benchmark, gained 4.2%, to $72.25 per barrel.

Bitcoin surged 6.6%, to $31,763.61.

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JPMorgan beats estimates again in the 2nd quarter amid record quarter for investment banking

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JPMorgan CEO Jamie Dimon.

  • JPMorgan beat estimates once again in the second quarter, with earnings per share of $3.78.
  • The bank’s investment banking arm posted record numbers, and the firm also received a $2.3 billion boost by reclaiming money that had been set aside to cover bad loans.
  • JPMorgan boss Jamie Dimon said customers and clients were faring well as the economy reopened.
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JPMorgan again beat expectations with its second-quarter earnings, as the banking giant benefited from record investment-banking fees and the release of cash set aside to cover loan losses.

The lender’s revenue came in at $31.4 billion, it earnings showed on Tuesday. That was above the $29.9 billion analysts had been expecting but down from $33.8 billion in the same quarter a year earlier.

Net income stood at $11.9 billion in the second quarter, boosted by the release of $3 billion that had been put aside to cover bad loans, which added $2.3 billion to the bottom line after charge-offs. Net income was up 155% from $4.7 billion a year earlier.

Earnings per share came in at $3.78, above expectations of $3.21 and up 174% from the same quarter in 2020.

Here are the key numbers:

  • Earnings per share: $3.78 vs. $3.21 expected.
  • Revenue: $31.4 billion vs. $29.9 billion expected.

“JPMorgan Chase delivered solid performance across our businesses,” said Chairman and CEO Jamie Dimon.

“This quarter we once again benefited from a significant reserve release as the environment continues to improve… Consumer and wholesale balance sheets remain exceptionally strong.”

Read more: UBS names 6 bank stocks to buy as successful stress tests open the door to buybacks and dividends – and highlights 2 laggards to avoid

The Wall Street lender, the biggest in the US by assets, is seen as a bellwether company whose earnings give a sense of the health of the economy. Its results on Tuesday showed how banks are benefitting from rapid economic growth which has made much of the money they set aside in 2020 to cover bad coronavirus loans redundant.

JPMorgan’s earnings also showed that its investment banking arm fared well in the second quarter despite quieter markets. Investment banking fees rose 25% year on year to a record high of $3.6 billion, largely driven by the boom in mergers and acquisitions.

The bank’s stock was down 0.63% in pre-market trading after the earnings were released, at $157.00. It has risen more than 20% in 2021 as so-called cyclical stocks have benefited from a lifting of coronavirus restrictions and strong economic outlook.

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Don’t expect the stock market to rally on the back of blowout corporate earnings, Bank of America says

A man sits on the Wall street bull near the New York Stock Exchange
Wall Street is looking for higher earnings from S&P 500 companies in the second quarter.

  • Wall Street is expecting more earnings beats to come from S&P 500 companies this earnings season.
  • But a jump in earnings doesn’t always result in a lock on hefty market returns, BofA analysts wrote.
  • 60% of losing quarters since 1996 have taken place in quarters with earnings beats, the firm said.
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Earnings beats in the second quarter look set to climb after the strongest quarter on record but such figures provide no guarantee that US equities will follow suit in running higher, according to Bank of America.

A fresh batch of corporate financial results is set to start rolling in on Tuesday, led by investment banks Goldman Sachs and JP Morgan Chase, followed by Citigroup and Morgan Stanley on Thursday. The reports arrive at a time of record highs for the S&P 500, whose return of 16% so far this year ​​has been “entirely driven” by rising earnings estimates of 21%, BofA said in a research note Monday.

Consensus estimates for per-share earnings for the second quarter have climbed by 7% to $45.01, the firm said, marking the biggest upward revision since regulatory rules governing information disclosures by companies went into effect in late 2000. The rosier outlook follows a record 23% beat in earnings in the first quarter of this year.

Quarterly earnings surprises and market returns have been correlated by 32% since 1996. However, “strong earnings don’t always translate to strong market returns,” wrote BofA equity strategists led by Savita Subramanian.

60% of down quarters since 1996 – or 75% of down quarters excluding the global financial crisis – have occurred in quarters with earnings beats, they said. “In 2000, despite earnings beating consensus for 10 straight quarters, the S&P 500 declined for four consecutive quarters,” said Subramanian.

BofA sees second-quarter per-share earnings beating by 11%, or $50, which would translate into growth of at least 79% year-over-year. It said early reporters and macro indicators suggest a beat of 3% to 20%.

“Continued earnings momentum should refuel investors’ confidence in the recovery amid slowdown concerns and drive a rotation back into Value,” the analysts said.

All 11 of the S&P 500’s sectors are expected to turn in higher earnings, led by the energy and industrials groups, according to FactSet.

BofA’s earnings report is scheduled to be released on Wednesday.

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