Dow touches record, S&P 500 notches 6-day win streak

Stock indexes mostly rose worldwide on Wednesday, with the Dow Jones Industrial Average touching a record intraday high, as more companies reported earnings that beat analysts' expectations, while oil prices jumped.

The Dow Jones Industrial Average rose 152.03 points, or 0.4%, ending at 35,609.34, after earlier trading above it 35,625.40 Aug. 16 closing high and carving out a fresh intraday record at 35,669.69 in the process.

The S&P 500 added 16.56 points, or 0.4%, finishing at 4,536.19, after earlier topping its Sept. 2 closing high at 4,536.95.

The Nasdaq Composite Index fell 7.41 points, or 0.1%, ending at 15,121.68 and snapping a 5-day win streak.

The market climbed a wall of worries over the last two months. Fears over the delta Covid surge, supply chain hiccups, a China property crisis, the Federal Reserve signaling the removal of stimulus and surging inflation reports rattled investors.

Photo: CNBC

Stocks making the biggest moves

Biogen (BIIB) — The drug maker’s stock rose 2.2% in the premarket after the company beat estimates on the top and bottom lines and raised its full year forecast. Biogen earned an adjusted $4.77 per share for the quarter, compared with a consensus estimate of $4.11 per share. The company is still optimistic about prospects for its Alzheimer’s drug Aduhelm, despite slower than expected adoption.

Novavax (NVAX) — The drug maker’s shares tumbled 26.1% in the premarket following a Politico report saying it was having trouble meeting Food and Drug Administration quality standards for its Covid-19 vaccine.

Verizon (VZ) — Verizon beat estimates by 5 cents with an adjusted quarterly profit of $1.41 per share, though revenue was slightly below Street forecasts. Verizon also increased its full-year guidance, as growing 5G adoption boosts sales.

Netflix (NFLX) — Netflix reported quarterly earnings of $3.19 per share, beating the Refinitiv consensus estimate of $2.56 per share, with revenue in line with forecasts. Netflix added 4.4 million new subscribers during the quarter, exceeding expectations, but it did forecast current quarter earnings below consensus.

United Airlines (UAL) — United lost an adjusted $1.02 per share for the third quarter, smaller than the loss of $1.67 per share that Wall Street had anticipated. United said the spread of the Covid delta variant has slowed, but not derailed, its recovery. 

IBM — The tech company saw its stock dropping more than 5% in extended trading following a revenue miss in the third quarter. its top two business segments — global services and the Cloud & Cognitive Software business — fell short of estimates.

Tesla — Shares of the electric vehicle company edged lower in after-hours trading even after the company posted earnings and revenue in the third quarter that beat expectations. The record results were driven by improved gross margins of 30.5% on its automotive business and 26.6% overall, both of which are records for at least the last five quarters.

What drove the market?

Sam Stovall, chief investment strategist at CFRA, said the market was continuing its rally from last week, which he said started with a weaker-than-expected producer prices reading and better-than-expected bank earnings.

“That kicked off this rally,” Stovall said. “I think it’s a combination of earnings. It is month-over-month changes in inflation that looks like it is peaking out and the effect of the Covid variant is slowing down.”

Stovall pointed out that the S&P 500 could also hit a record high soon, which would be a bullish sign for the market going forward.

“History shows that stock market advances following the recovery from pullbacks recorded an average price gain of 8.4% over the following 98 calendar days before slipping into a new decline of 5% or more. Favorable seasonal factors should also help power the market to additional new highs,” Stovall said about the S&P 500.

Verizon was one of the biggest gainers in the Dow, jumping 2.4% after earnings topped estimates for the third quarter. The telecom giant raised its forecast because of growing 5G adoption. Biogen shares edged lower even after it beat estimates on earnings and revenue and raised its full-year guidance.

More than 70 S&P 500 components report earnings this week and so far reports are going very well. Third-quarter earnings are on pace for a 35% increase from a year ago, according to Earnings Scout. IBM, Tesla, CSX and Las Vegas Sands are among the names set to report after the market closes.

“We believe that the stock market has more to climb in this bull market and that some of the Covid headwinds are receding even as inflation increasingly becomes a headwind, because many companies continue to have pricing power, which should preserve corporate profits,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Giorgio Caputo, senior investment analyst at JO Hambro Capital Management, said that while the economy appears to be moving past its earlier “air pocket” tied to global coronavirus cases and severe supply-chain bottlenecks, that tapering of bond purchases by the Fed will be important.

“We are going to be going through the removal of $120 billion of monthly liquidity that’s been coming into markets,” he told MarketWatch. “That’s the mother of all buyback plans.”

“If there’s one thing to be mindful of, and respect, it’s the power of liquidity,” Caputo said.

In economic data, the Fed’s latest Beige Book survey of economic conditions released Wednesday pointed to a U.S. economy that still is growing at a solid pace, but labor shortages and supply-chain bottlenecks that have been restraining growth and triggering higher inflation.