Strong earnings results led benchmarks to close in positive territory on Wednesday, with the Dow finishing above 26,000 for the first time. Moreover, all the three key U.S. indexes settled at new record highs after closing in the red on Tuesday. Additionally, in its Beige Book, the Fed provided an encouraging outlook about the U.S. economy, which in turn also boosted investor sentiment. Both the Dow and S&P 500 posted their best 11-trading day start for the first time in a year since 1987, following which bond yields and the U.S. dollar increased.
How the Benchmarks Fared?
The Dow Jones Industrial Average (DJI) increased 1.3%, or 321.65 points to close at 26,115.65. The S&P 500 rose 0.9% to close at 2,802.56. The tech-laden Nasdaq Composite Index closed at 7,298.28, gaining 1%. The fear-gauge CBOE Volatility Index (VIX) increased 3.2% to close at 12.03. A total of around 7.40 billion shares were traded on Wednesday, higher than the last 20-session average of 6.31 billion shares. Advancers outnumbered decliners on the NYSE by a 1.85-to-1 ratio. On Nasdaq, a 1.83-to-1 ratio favored advancing issues.
Upbeat Earnings From GS, BAC and USB Boost Sentiment
On the earnings front, several major banks like Goldman Sachs Group, Inc. (GS - Free Report) , Bank of America Corporation (BAC - Free Report) and U.S. Bancorp (USB - Free Report) reported better-than-expected earnings results. Goldman Sachs reported fourth-quarter earnings per share and revenues, which beat the respective Zacks Consensus Estimate. For full-year 2017, adjusted net income per share of $19.76 also surpassed the Zacks Consensus Estimate of $18.98. (Read More: Goldman Q4 Earnings Impressive, Tax Expense Recorded)
Bank of America posted fourth-quarter earnings per share and revenues, which beat the respective Zacks Consensus Estimate. Bank of America’s efforts to realign its balance sheet and focus on core operations will likely support bottom-line growth in the future. (Read More: BofA Beats Q4 Earnings on Loan Growth, Higher Rates)
U.S. Bancorp reported fourth-quarter earnings per share and revenues, which beat the respective Zacks Consensus Estimate. Further, improving economy and lower taxes will support its financials going forward. (Read More: U.S. Bancorp Beats Q4 Earnings Estimates, Costs Up)
However, shares of Goldman Sachs, Bank of America and U.S. Bancorp fell 1.9%, 0.2% and 1.5%, respectively, after they announced big one-time charges related to the new tax law.
Fed Beige Book, Bond Yield, Dollar In Focus
The Federal Reserve in its Beige Book stated that out of 12 Federal Reserve Districts, 11 reported “modest to moderate” economic growth. Additionally, per the Beige Book “employment continued to grow at a modest pace” in majority of the districts. Also, most of the districts reported “modest to moderate price growth,” which boosted sentiment.
Higher rate environment and optimism over steady economic growth weighed on bond prices. Lower bond prices supported the 10-year U.S. Treasury yield, which increased from 2.544% to 2.579% on Wednesday. Higher treasury yields generally boost profitability from banks’ lending activities.
Following this development, the Financial Select Sector SPDR (XLF) advanced 0.8%. Some of its key holdings, including Wells Fargo & Company (WFC - Free Report) and Morgan Stanley (MS - Free Report) increased 2.2% and 1.4%, respectively. While Wells Fargo has a Zacks Rank #3 (Hold), Morgan Stanley holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Additionally, shares of Apple Inc. (AAPL - Free Report) rose 1.7% after the tech giant announced that it will pay a one-time repatriation tax of $38 billion and will raise its investment in the U.S. over the next five years. This latest announcement by Apple that has overseas cash reserves of more than $250 billion at the end of the fiscal fourth quarter boosted the U.S. Dollar Index (DXY), which rose by 0.6% to 90.97 on Wednesday.
Stocks That Made Headlines
Kinder Morgan Beats Q4 Earnings and Revenue Estimates
Kinder Morgan Inc. (KMI - Free Report) reported fourth-quarter 2017 earnings per share, beating the Zacks Consensus Estimate and improved about 10.5% year over year. (Read More)
ADTRAN Earnings & Revenues Surpass in Q4, Down Y/Y
ADTRAN Inc. (ADTN - Free Report) reported fourth-quarter 2017 results with both the top and the bottom line beating the Zacks Consensus Estimate. (Read More)
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