Bond Yields, Stocks Rise Amid Earnings

On Feb 8, 2022

Major U.S. stock indexes rose Tuesday as investors snapped up shares of companies across industries.

The S&P 500 advanced 0.8%, while the Dow Jones Industrial Average added 1%, or about 345 points. The tech-heavy Nasdaq Composite climbed 1.1%.

Eight out of the S&P 500’s 11 sectors were recently up for the day, with gains of more than 1% for groups including financials, technology and consumer discretionary. The energy segment bucked the trend, declining more than 2% as oil prices fell.

A generally positive earnings season has helped support stocks. With results in from about 60% of S&P 500 companies, analysts expect profits rose 30% in the fourth quarter from a year earlier, according to FactSet. That is up from estimates for 21% growth at the end of September.

At the same time, a number of companies have adopted a wary tone about the path ahead. As of late last week, 34 companies in the S&P 500 had given negative earnings guidance for the first quarter, while 13 companies had issued positive guidance, according to FactSet.

“The guidance we’re hearing from companies is understandably cautious,” said

Tom Plumb,

president and portfolio manager at Plumb Funds. “It’s feeding in some cases the anxiety people have about political and economic events and Federal Reserve policy.”

Markets have been roiled by volatile trading in recent sessions, prompted in part by expectations of higher interest rates. The Fed’s expected tightening comes against a backdrop of moderating growth and investors have been reassessing which companies are best-placed to weather the more challenging outlook.

“The question is: Does the Fed get it right? Do they walk the line properly between raising rates and tightening policy at a pace that helps to curb inflation but doesn’t slow demand and hurt the economy,” said

Peter Langas,

chief portfolio strategist at Bessemer Trust.

The Federal Reserve has signaled it plans to raise interest rates in 2022 in response to stubbornly high inflation. WSJ’s J.J. McCorvey explains what higher rates could mean for your finances. Photo illustration: Todd Johnson

Tech firms, the darlings of last year’s rally, have been at the forefront of investors’ reassessments, as higher interest rates threaten to weigh on their pricey valuations, which rely on expectations for growth far into the future. Large-cap tech firms have been particularly choppy in recent days, exacerbating broader market volatility.

Shares of

Apple,

Microsoft

…