Wall Street sees gains as earnings season begins to intensify
Wall Street experienced a rise on Wednesday as most stocks saw an increase, despite a few companies like Alphabet reporting a decrease in profit. The S&P 500 saw a rise of 0.4%, with the Dow Jones Industrial Average adding 317 points, or 0.7%, and the Nasdaq composite climbing by 0.2%.
Mattel, the toymaker, saw a jump of 15.3% after surpassing analysts’ expectations for profit in the last quarter. This increase in profit was largely driven by the success of its Hot Wheels brand, compensating for the lower performance of Barbie and other dolls. Mattel also provided a positive forecast for this upcoming year, exceeding analysts’ projections.
Amgen experienced a 6.5% rally, significantly impacting the rise in the S&P 500. The company reported stronger profit than anticipated for the last quarter, primarily due to the growth of Repatha medicine, which assists in reducing bad cholesterol and decreasing the risk of heart attacks.
Conversely, Alphabet faced a 7.3% drop despite reporting stronger-profit figures for the last quarter than expected. Investors were concerned about the slowing growth of its cloud business, with revenue falling short of predictions. The announcement of a $75 billion investment budget by Alphabet for the upcoming year, more than expected, raised additional eyebrows as it advances artificial intelligence technology progress.
Despite Advanced Micro Devices exceeding profit expectations for the last quarter, with a 6.3% increase, the stock fell. Investors were anxious about the lack of details provided by the CEO regarding the performance outlook for its AI offerings.
The stock market’s hopeful expectation for increased corporate profits is exacerbated by the rapid climb in stock prices relative to corporate profits, leading some to describe them as overvalued. The looming uncertainty in the global economy stems from concerns about President Donald Trump’s tariffs. Following recent reprieves granted by Trump on tariffs for Mexico and Canada, global trade war-related fears have lessened slightly, instilling optimism in traders that tariffs are used as negotiation tactics rather than standard policy.
Economist David Mericle from Goldman Sachs anticipates continued tariff risks for both countries until the end of the review of the US’s existing trade agreement with Mexico and Canada, likely by the middle of next year. The ongoing tariffs on Chinese goods, along with the possibility of tariffs on EU autos, could elevate inflation temporarily, pushing a key inflation measure to 2.6% in December, surpassing the Federal Reserve’s target of 2%.
The looming threat of inflation pressure may deter the Fed from reducing interest rates this year, after initiating rate cuts in September to relieve economic strain. Bond yields declined following reports of lower growth for various US service industries last month as cited by the Institute for Supply Management. This feedback was attributed to inclement weather conditions impacting business operations.
