Wall Street ended sharply higher on Wednesday, with strong profit forecasts from PayPal and CVS Health Corp lifting sentiment and helping elevate the Nasdaq to its highest level since early May. A pullback in energy stocks, however, limited gains on Bay Street as oil prices tumbled 4%.
Data showed the U.S. services industry unexpectedly picked up in July amid strong order growth, while supply bottlenecks and price pressures eased. That supported views that the economy was not in recession despite output slumping in the first half of the year.
A fresh batch of strong results from companies including PayPal and CVS Health Corp boosted sentiment in a largely upbeat quarterly reporting season. Reports exceeding low expectations have helped Wall Street rebound from losses caused by worries about decades-high inflation, rising interest rates and shrinking economic output.
“We’re going through Q2 earnings and, by and large, from the tech complex to consumer discretionary and industrials, we’re seeing a lot of better-than-feared prints, and that’s just good enough right now,” said Sahak Manuelian, managing director of trading at Wedbush Securities in Los Angeles.
Apple and Amazon rallied almost 4%, while Facebook-owner Meta Platforms jumped 5.4%.
PayPal soared almost 10% after it raised its annual profit guidance and said activist investor Elliott Management had an over $2 billion stake in the financial technology firm.
CVS Health gained 6.3% after the largest U.S. pharmacy chain raised its annual profit forecast after posting strong quarterly results.
Manuelian said an additional factor behind Wednesday’s stock rally was growing confidence among investors that the Fed has already carried out the bulk of the interest rate hikes that will be necessary to bring inflation under control.
The S&P 500 climbed 1.56% to end the session at 4,155.12 points.
The Nasdaq gained 2.59% to 12,668.16 points, while Dow Jones Industrial Average rose 1.29% to 32,812.50 points.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 40.61 points, or 0.2%, at 19,545.94, clawing back some of the previous day’s decline when geopolitical tensions gripped financial markets.
The technology sector on the Toronto market rallied 4.6%, paced by a 10.8% jump in the shares of e-commerce giant Shopify Inc, while heavily weighted financials ended 1.2% higher.
Energy fell 4.2% as oil prices dropped. U.S. crude oil futures settled nearly 4% lower at $90.66 a barrel after U.S. data showed crude and gasoline stockpiles unexpectedly surged last week and as OPEC+ said it would raise its oil output target by 100,000 barrels per day.
The TSX materials group, which includes precious and base metals miners and fertilizer companies, lost 1.3% as copper prices fell.
Additional U.S. data on Wednesday showed new orders for U.S.-manufactured goods increased solidly in June and business spending on equipment was stronger than initially thought, pointing to underlying strength in manufacturing despite rising interest rates.
The most traded stock in the S&P 500 was Tesla, with $24.3 billion worth of shares exchanged during the session. Its shares rose 2.27%.
Of the 11 S&P 500 sector indexes, 10 rose, led by information technology, up 2.69%, followed by a 2.52% gain in consumer discretionary.
The S&P 500 has rebounded about 13% from its closing low in mid-June and would have to climb another 15% to get back to its record high close in early January.
Moderna Inc surged about 16% after the vaccine maker announced a $3 billion share buyback plan.
Regeneron Pharmaceuticals climbed 5.9% after it beat quarterly revenue estimates, while coffee chain Starbucks Corp rose over 4% after it reported upbeat quarterly profits.
Advancing issues outnumbered falling ones within the S&P 500 by a 3.7-to-1 ratio. The S&P 500 posted two new highs and 30 new lows; the Nasdaq recorded 51 new highs and 37 new lows.
Volume on U.S. exchanges was relatively heavy, with 11.7 billion shares traded, compared to an average of 10.7 billion shares over the previous 20 sessions.
The yield on the 10-year Treasury rose to 2.75% from 2.73% late Tuesday.
Reuters, Globe staff
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