S&P 500, Nasdaq Jump 1% On Strong Earnings and Stable Treasury Yields

Barry Adams
24 Oct, 2023
New York City

Stocks on Wall Street advanced after investors reviewed the latest batch of strong earnings, and Treasury yields hovered near 16-year highs.

Market sentiment improved in early trading after Verizon, Coca-Cola, and General Electric reported better-than-expected earnings.

Benchmark indexes edged more than 0.6% on earnings optimism and hopes that bond yields may trend lower amid rising geopolitical tensions in the Middle East.

Investors are adjusting their expectations of U.S. economic growth, but the interest rate outlook remains uncertain.

The Federal Reserve began its aggressive rate hike campaign 18 months ago after keeping rates near zero for 15 years after policymakers were caught off-guard following pandemic-era supply chain disruptions coupled with the Fed's rapid expansion of its balance sheet by $4 trillion.

Moreover, despite the end of pandemic-era supply chain disruptions, the Federal Reserve is supporting the surge in the annual budget deficit, which reached $1.7 trillion in the fiscal year 2023 ending in September.

Despite the multiple interest rate hikes, inflation has cooled but not dropped to the target rate of 2%, and the latest comments from Federal Reserve Chairman Powell suggest that policymakers are less likely to increase rates at the next meeting, but higher rates may be needed through 2024.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.7% to 4,245.11, and the Nasdaq Composite rose 0.8% to 13,120.29.

The yield on 2-year Treasury notes increased to 5.09%, 10-year Treasury notes inched higher to 4.88%, and 30-year Treasury bonds edged up to 5.0%.

Crude oil decreased $0.78 to $84.76 a barrel, and natural gas prices edged up 1 cent to $2.93 a thermal unit.

The dollar index edged higher to 106.19, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.

 

U.S. Stock Movers

Coca-Cola Company jumped 2.8% to $55.63 after the beverage company reported stronger-than-expected third-quarter earnings and lifted its annual outlook as the company sold more cases of beverages.

General Motors Company rose 0.3% to $29.29 after the vehicle maker reported rising sales and earnings in the third quarter, but the automaker also pulled its annual earnings outlook, citing the ongoing United Auto Workers strike.

Revenue in the third quarter increased 5.4% to $41.89 billion, net income edged lower to $3.06 billion from $3.31 billion, and diluted earnings per share eased to $2.20 from $2.25 a year ago.

The company also withdrew its previously issued adjusted annual earnings outlook between $12 billion and $14 billion and net income attributable to shareholders between $9.3 billion and $10.7 billion.

Tesla Inc. rose 1.8% to $215.91, and the company said in a regulatory filing that it is facing several investigations from the Department of Justice covering a range of electric vehicles, "personal benefits and related parties and personnel decisions," and other issues involving its operations.

RTX Corp. soared 5.9% to $77.48 after the aerospace company reported better-than-expected revenue and earnings in its latest quarterly results.

Spotify Technology SA jumped 7.2% to $165.10 after the audio streaming company reported third-quarter revenue that met investors' expectations, and the company said monthly active subscribers are expected to top 600 million in the fourth quarter.