By Will Horner and Michael Wursthorn
The Dow Jones Industrial Average pared earlier gains as
investors begin shifting their focus to the latest
earnings-reporting season, starting with the biggest banks.
Goldman Sachs Group accounted for a significant chunk of the
blue-chip index's momentum after the bank reported sharply higher
profits for the first quarter, benefiting from a turbocharged
market and an economic recovery.
Energy stocks also rose, giving the stock market an added boost,
after the International Energy Agency on Wednesday raised its
forecast for annual global oil demand, sending crude oil prices
higher. And shares of other companies tied to the reopening play
rebounded from Tuesday's losses following U.S. health authorities
recommending a pause on the rollout of Johnson & Johnson's
Goldman and other bank stocks including JPMorganChase and Wells
Fargo kicked off the first-quarter earnings reporting season
Wednesday. Investors say they are optimistic about the biggest
American companies' earnings and outlook for the rest of the year,
given the projections for a sharp economic recovery.
Sizable government stimulus measures and repeated pledges from
the Federal Reserve to continue supporting the recovery have
largely helped alleviate concerns about the pace of the reopening
and the vaccination rollout.
"As the fundamentals emerge in the weeks ahead, there should be
some really eye-catching earnings data coming through and some very
strong economic data," said Paul O'Connor, head of a multiasset
team at Janus Henderson Investors. "It is about working out whether
the fundamentals are strong enough to justify what we have seen
Analysts' projections back that up that outlook. Wall Street's
forecasters predict the S&P 500 will grow first-quarter
earnings 27% from the same period a year earlier, according to
FactSet. That is sharply higher than the nearly 4% profit growth
the S&P 500 clocked in the fourth quarter of last year.
On Wednesday, the Dow pared its gain following the release of a
Federal Reserve report, which said economic activity had
accelerated to a moderate pace in late February. The blue-chip
index was recently up 55 points to 33732, falling short of its Apr.
9 closing record.
Losses across tech and communication stocks, the market's
heavyweights, widened after the Fed report, known as the Beige
Book, and dragged the S&P 500 and Nasdaq Composite into the
red. The broad S&P 500 was down 0.4% in recent trading, while
the Nasdaq Composite slipped 1%.
But gains across financial and energy stocks, as well as shares
of companies expected to benefit from a rebounding economy, pushed
the Dow higher and shielded the S&P 500 from a deeper
Goldman shares rose 2.3% after disclosing better-than-expected
results for the first quarter, while Wells Fargo advanced 5.6%
after the bank also topped analysts' earnings projections.
JPMorgan, however, ticked lower, shedding 1.9% after the bank
said that first-quarter profit nearly quintupled following the
release of $5.2 billion it had set aside to cover soured loans.
Still, the KBW Nasdaq Bank Index of big lenders, added 1.4%.
Other large American businesses will report profits through the
"There has never been more bullish expectations on what
investors think they are going to hear from companies," said David
Donabedian, chief investment officer at CIBC Private Wealth
Management. "With earnings season, you get a lot of buy-the-rumor,
sell-the-news, and there is this idea that we are going to get a
blowout first quarter."
Energy stocks were the best-performing sector on a percentage
basis, rising 3% in recent trading. The sector got a boost after
brent crude oil prices rallied more than 4.5% following the IEA
Shares of airliners, cruise-ship operators and hotel
chains--part of the reopening trade--also rose. United Airlines
added 1.2%, Marriott International gained 1.4% and Royal Caribbean
Group advanced nearly 1%.
Investors also got more clues on how the Federal Reserve will
eventually scale back some of the fiscal stimulus it had injected
into financial markets at the onset of the Covid-19 pandemic.
Speaking at virtual event held by the Economic Club, Fed
Chairman Jerome Powell said the central bank will begin reducing
bond purchases "well before" raising interest rates. He added the
Fed is unlikely to raise rates this year
The yield on the 10-year Treasury note edged higher to 1.641%
from 1.622% on Tuesday. Yields rise as prices fall.
Also in Wednesday's trading mix was the public listing of
Coinbase Global. Shares of the cryptocurrency exchange operator
opened at $381 and were recently up 48% from their $250 reference
Overseas, the Stoxx Europe 600 gauge edged up 0.2%. In Asia,
major stock indexes ended the day mostly higher. Hong Kong's Hang
Seng Index rose 1.4%, and the Shanghai Composite Index rose 0.6%.
Japan's Nikkei 225 fell 0.4%.
Write to Will Horner at William.Horner@wsj.com and Michael
Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
April 14, 2021 16:17 ET (20:17 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.