Wall Street did its best duck impression Wednesday, with its feet kicking like crazy under the water, even if things looked pretty calm up top.
The third-quarter earnings season extended a promising start with help from the healthcare sector. Abbott Laboratories (ABT, +3.3%) breezed past Q3 revenue and earnings expectations and raised its full-year profit guidance. Insurer Anthem (ANTM, +7.7%) hit a record high after beating estimates and saying COVID-19 should weigh less on its bottom line next year.
Telecom Verizon (VZ, +2.4%) also stood out with a decent gain after reporting a second consecutive quarter of subscriber growth and upping full-year forecasts.
"This earnings season could be highly important for investors, as inflation, labor, supply and currency risks settle in," says Lauren Goodwin, economist and portfolio strategist at New York Life Investments. "We expect strong results, as earnings reports so far indicate that many large U.S. companies have generated higher profitability despite rising labor costs, thanks to sustained sales growth."
But big moves weren't exclusive to earnings reactions. Pinterest (PINS, +12.8%) rocketed higher on reports that the social media platform is in late-stage talks to be acquired by PayPal (PYPL, -4.9%).
Outside the equity markets, Bitcoin (+3.6% to 66,416.40) raced above its previous all-time high around $65,000, spurred by optimism over the launch of the first Bitcoin futures ETF. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Despite all this, the major indices themselves didn't move much.
The Dow Jones Industrial Average (+0.4% to 35,609) neared record highs with its fifth consecutive advance, as did the S&P 500 (+0.4% to 4,536), which has gained in six straight sessions. Relative weakness in tech, however, snapped the Nasdaq Composite's five-day win streak with a marginal decline to 15,121.
"Earnings have provided the catalyst to kick off this (recent) rally," says Michael Reinking, senior market strategist at the New York Stock Exchange, "in part because the numbers have been positive, but also in helping to shift the focus from the negative macro headlines that have plagued investors throughout the end of the summer into the fall."
Other news in the stock market today:
After the closing bell, Tesla (TSLA) reported earnings of $1.86 per share on revenues of $13.76 billion, both of which beat Wall Street consensus estimates ($1.59 per share and $13.63 billion, respectively). The stock was marginally down in after-hours action following a marginal gain during regular Wednesday trade
During regular hours, Netflix (NFLX, -2.2%) was in focus after the streaming giant reported earnings. In the third quarter, NFLX brought in higher-than-expected earnings of $3.19 per share on in-line revenues of $7.48 billion. The company also said it added 4.4 million global paid net subscribers over the three-month period, more than the 3.84 million analysts were expecting. Oppenheimer analysts maintained their Buy rating and lifted their price target by $130 to $750 in the wake of the results – the latter representing implied upside of roughly 20% to today's close at $625.14. Massive hyperlocal production operations and the ability to distribute content globally is creating a wider moat for NFLX, while the company's pricing power "will be critical to maintaining solid top-line growth in the U.S. and Canada," they wrote in a note.
Ford (F) jumped 4.0% after Credit Suisse analyst Dan Levy upgraded the auto stock to Outperform from Neutral (the equivalents of Buy and Hold, respectively). "When we downgraded Ford early last year, our concern was that Ford was struggling in balancing the 'two clocks' – near-term execution issues would ultimately limit Ford's ability to adequately prepare for the long-term transition of the auto industry," he says. "Yet in the past year-plus, we've seen a significant turnaround underway at Ford." In addition to ending its "cycle of quarterly earnings disappointments," the company has sharply accelerated its shift to electric vehicles (EV), which Levy believes will "be at the core of improving long-term perception."
The small-cap Russell 2000 enjoyed a 0.6% improvement to 2,289.
U.S. crude futures surged 1.2% to settle at $83.42 after the Energy Information Administration (EIA) said domestic crude inventories unexpectedly fell last week.
Gold futures rose 0.8% to finish at $1,784.90 an ounce.
The CBOE Volatility Index (VIX) was down 1.3% to 15.49.
Also Pay Attention to Interest Rates
While the Dow and S&P 500 are mere points away from all-time highs, the tech-heavy Nasdaq still has roughly 2% to go after about a month or so of underperformance relative to its index peers.
You can put some of the blame on their sensitivity to interest rates; The 10-year Treasury's yield has climbed from 1.3% at the start of September to 1.6% of late – its highest point since mid-May.
While the Federal Reserve isn't expected to lay a hand on its benchmark Fed funds rate until late 2022, longer rates could still keep the pressure on by inching higher. Indeed, Kiplinger forecasts a 1.8% yield on the 10-year T-note by early 2022.
But one stock's pain can often be another stock's gain, and that's the case with interest rates, which could keep cramping the technology sector while buoying other parts of the market.
These 10 stocks, for instance, greet higher rates with open arms as they can often be a direct boost to the bottom line. Most of these picks reside within the financial sector, but that's not the only way to reap rewards from rising rates. These seven exchange-traded funds (ETFs), for instance, allow investors to access several strategies across multiple asset classes that should benefit if interest rates continue to swell.