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Dow closes up more than 530 points as investors get pumped for earnings season, new jobs numbers

MarketWatch logo MarketWatch 10/14/2021 Thornton McEnery
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MARKET SNAPSHOT

U.S. stocks closed significantly higher on Thursday as investors weighed upbeat earnings from big banks, as well as economic data that showed a drop in first-time jobless claims to a pandemic low and smaller-than-expected rise in producer prices.

A continued fall in Treasury yields, meanwhile, offered support for interest rate sensitive technology stocks.

What happened
  • The Dow Jones Industrial Average closed up 534.75 points, or 1.56%, to 34,912.56.
  • The S&P 500 advanced 74.46 points, or 1.71%, to 4,438.26. .
  • The Nasdaq Composite finished up 251.79 points, or 1.73%, to 14,823.43.

On Wednesday, the Dow Jones Industrial Average fell less than a point to extend a losing streak to four sessions, while the S&P 500 rose 0.3% and the Nasdaq Composite advanced 0.7%.

What drove markets

Corporate earnings reporting season is picking up steam, with results from a handful of major banks topping expectations. All 11 sectors of the S&P 500 index rose, with the materials and technology groups outpacing others.

“We’re having a nice start to earnings season. The growth story might be facing some difficulties, but it’s still in place.” said Edward Moya, Senior Market Analyst for the Americas, at OANDA. “It will be hard to be bearish on stocks.”

“We’re still benefitting from a massive amount of stimulus,” said Moya. “There are clearly a lot of supply chain headwinds, but none of that matters.

Read: Wall Street rewards Morgan Stanley and Bank of America for earnings but Wells Fargo and Citi stocks dip

The S&P 500 close put the index above its 50-day moving average for the first time in 12 trading days. For the Dow, Thursday’s close snapped a 25-day streak below its 50-day moving average.

Investors also cheered economic data, including a drop in first-time claims for unemployment benefits last week to 293,000 — the first sub-300,000 reading since before the pandemic took hold in early 2020.

“While the September jobs report revealed a slower pace of job creation, the labor market recovery continues to move forward and the claims data are consistent with an improving employment situation,” said Nancy Vanden Houten, lead economist at Oxford Economics, in a note. “We expect further progress in the months ahead as the health situation is improving following the surge in cases over the summer from the delta variant.”

In other U.S. data, producer prices rose 0.5% in September compared with 0.7% in August but were up 8.6% for the September year compared with 8.3% for the year to August.

Investors have also focused on the more benign elements of Wednesday’s consumer-price index report, which showed the core measure that excludes food and energy prices rising 0.2% in September, keeping the year-over-year growth rate at 4%.

Prices of airfares, hotels and used cars were among the costs that declined. Also Wednesday, minutes from the Federal Reserve’s September meeting affirmed that policy makers are likely to begin tapering monthly bond purchases before year-end.

“The market really appears to be buying back into the central bank’s expectation that the rise in inflation will be transitory,” said Fiona Cincotta, senior financial markets analyst at City Index.

“Furthermore, the Fed indicating that it will start tapering removes an element of the unknown from the market; we all know how much the market hates unknowns,” she said. “The market has spent the past few months obsessing over the timing of the Fed’s taper. Now it is pretty much out in the open sentiment can move forward.”

Read: Stronger-than-expected U.S. inflation data has bond traders weighing the risk of a Fed policy error

Which companies were in focus?
  • Bank of America Corp. reported profit and revenues that topped expectations as it released $1.1 billion in reserves to its bottom line, driven primarily by asset quality improvements. Shares rose 4.5%.
  • Shares of Wells Fargo & Co. declined 1.5% after the bank beat Wall Street estimates, while releasing $1.7 billion from loan-loss reserves.
  • Morgan Stanley MS shares were 2.5% higher after the bank reported results that beat expectations, helped by a 68% rise in investment-banking revenue to $2.85 billion from $1.7 billion.
  • Shares of Citigroup Inc. rose edged up 0.8% after the bank said earnings rose 48%, beating estimates.
  • UnitedHealth Group Inc. shares rose almost 4.2% after the healthcare company and Dow component raised its guidance for full-year earnings, and said that its previous expectations for how Covid-19 will affect results this year remained steady.
  • Shares of Domino’s Pizza Inc. rose 0.%, barely shaking off results that showed the pizza-delivery chain missed on revenues.
  • Shares of Walgreens Boots Alliance jumped 7.4% after the pharmacy retailer reported fiscal fourth-quarter earnings and sales that beat expectations.
  • More than 10,000 Deere & Co. workers went on strike Thursday, after rejecting a contract offer. Shares were up 0.3%.
What did other markets do?
  • The 10-year Treasury yield fell 1.9 basis points to 1.520%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index a measure of the currency against a basket of six major rivals, fell 0.1%.
  • The Stoxx Europe 600 rose 1.2%, while London’s FTSE 100 rose 0.9%.
  • The Shanghai Composite fell 0.1%, while Japan’s Nikkei 225 advanced 1.5%.
  • Oil futures rose, with the U.S. benchmark up 1.2% at $81.44 a barrel. Gold futures edged up 0.2% to $1,798.40 an ounce.

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