S&P 500 closes at record high; earnings, rate outlook in focus

Yesterday was a day of uncertainty debating between rate cuts and growth, today was once again a day brimming with optimism with investors reveling in growth and the strength of earnings shooting the Dow and Nasdaq both up 3-digits. Once again, the S&P made another record and the 147 points ahead on the Nasdaq has now put that index just 2% shy of its 2021 record. More mixed messages came from the Fed with the Minneapolis Prez predicting up to 3 cuts this year, while the Fed’s Kugler said more positive data is needed.  More than half of Q4 S&P is in with 81.2% beating estimates. Volume was a little below average at 11.2 billion. 

S&P 500 closes at record high; earnings, rate outlook in focus

By Sinéad Carew and Johann M Cherian

Wed February 7, 2024 4:34 PM

DJ: 38,521.36  +141.24       NAS: 15,609.00  +11.32        S&P: 4,954.23  +11.42     2/6

DJ: 38,677.36  +156.00       NAS: 15,756.64  +147.65      S&P: 4,995.06  +40.83     2/7

Feb 7 (Reuters) - Wall Street's major stock indexes rose on Wednesday, with the benchmark S&P 500 registering a record closing high, as investors applauded overall strength in U.S. earnings and monitored Federal Reserve comments for clues on interest rates.  Shares in Chipotle Mexican Grill(CMG.N), opens new tab finished up 7.2%after it topped analyst estimates for quarterly profit and sales on strong demand for its burritos and rice bowls even as prices rose in its report issued late on Tuesday  Ford (F.N), opens new tab shares rose 6% as the automaker increased its first-quarter dividend and decided to scale back investments in new capacity for loss-making electric vehicles.  With more than half of the S&P 500 companies having reported quarterly results, 81.2% surpassed profit expectations, according to LSEG data on Tuesday.

"The optimism around, for the most part, better earnings results, continues to carry the day and continues to keep the market in a positive bias," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

The Dow Jones Industrial Average (.DJI), opens new tab rose 156.00 points, or 0.40%, to close at 38,677.36 while the S&P 500 (.SPX), opens new tab gained 40.83 points, or 0.82%, to finish at 4,995.06. The Nasdaq Composite (.IXIC), opens new tab gained 147.65 points, or 0.95 %, to 15,756.64.

The S&P notched another record closing high while the Nasdaq was still almost 2% shy of its record close of 16,057.44 reached in November 2021.  Among the 11 S&P 500 sectors, nine advanced, led by a 1.4% gain in the tech sector (.SPLRCT), opens new tab followed by consumer discretionary (.SPLRCD), opens new tab, which rose 1.1%. The weakest sector was consumer staples (.SPLRCS), opens new tab, which was down 0.08%.

James noted that investors have been fighting off "negativity overhanging the market" due to concerns about the banking and commercial real estate sectors since last week when New York Community Bancorp (NYCB.N), opens new tab reported a surprise loss and cut its dividend.  "Elevated anxiety levels become self-fulfilling," he said, also pointing to volatility among other regional banks. However, the KBW regional bank index (.KRX), opens new tab pared some losses to close down 0.1% after falling more than 2% earlier in the day.  New York Community Bancorp shares rebounded in afternoon trading to close up 6.7%, shaking off an early decline of more than 13%. The lender's newly appointed executive chairman Alessandro DiNello, vowed to cut its exposure in the troubled commercial real estate sector, where it took loan write-offs.

On Sunday Fed Chair Jerome Powell ruled out a March interest rate cut, and now traders were looking for fresh clues from other Fed officials.  Minneapolis Fed President Neel Kashkari noted he expects two to three rate cuts this year for now, while Fed Governor Adriana Kugler said more assurance is needed before lowering rates.

Shares in Snap (SNAP.N), opens new tab slumped 34.6%, hitting a two-month low after it missed quarterly revenue estimates, as the Snapchat owner struggled to compete for advertising dollars.  Uber (UBER.N), opens new tab forecast quarterly core profit and gross bookings above estimates. However, its shares closed up just 0.3% as it deferred announcements around capital allocation plans to its investor day on Feb. 14.  Fortinet (FTNT.O), opens new tab shares rose 3.8% after the cybersecurity firm's fourth-quarter profit beat estimates. U.S.-listed shares of Alibaba Group fell on its downbeat quarterly revenue report.  VF Corp (VFC.N), opens new tab shares sank 9.7% after missing expectations for third-quarter results, with the Vans sneaker maker also announcing CFO Matt Puckett's exit this year.  Enphase Energy (ENPH.O), opens new tab shares surged 16.9% as the solar inverter maker expects inventory levels to normalize and demand for its products to pick up by the end of second quarter.

Advancing issues outnumbered decliners by a 1.2-to-1 ratio on the NYSE where there were 409 new highs and 80 new lows.  On the Nasdaq 1,855 issues advanced and 2,452 declined with declining issues outnumbering advancers by a 1.3-to-1 ratio.  The S&P 500 posted 79 new 52-week highs and 4 new lows while the Nasdaq recorded 234 new highs and 144 new lows.

On U.S. exchanges 11.25 billion shares changed hands compared with the 11.58 billion moving average for the last 20 sessions.