Stocks rallied Tuesday, recovering losses incurred in the previous session, as traders bet on strong corporate earnings reports.
The Dow Jones Industrial Average jumped 541 points, or 1.74%. The S&P 500 gained 2.05%, and the Nasdaq Composite rose 2.36%.
Investors assessed the latest round of earnings reports that showed businesses working through economic pressures better than feared in the second quarter, even as recession concerns persist.
“Both investors and the companies were expecting hot inflation, so companies talking about hot inflation having happened in that second quarter was not a surprise at all,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. “What was a surprise was that they were able to manage through it well.”
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All sectors in the S&P 500 were higher Tuesday. Bank stocks outperformed with shares of Goldman Sachs rising more than 4% following a strong earnings report Monday. Bank of America climbed nearly 3%, and Wells Fargo gained about 3%.
Google was up more than 2% following a 20-for-1 stock split that took place Monday.
Twitter shares gained 4%. On Tuesday, the social media platform won a motion for an expedited trial in its lawsuit against Elon Musk, as the investor attempts to back out of a $44 billion deal to acquire the company.
Halliburton shares rose more than 1% on the back of sharply rising oil prices this year, which helped boost profits for the company in its most recent quarter.
Hasbro shares climbed 1% after the toymaker’s earnings per share beat analyst expectations, though its revenue for the previous quarter came in a tad below expectations, according to consensus estimates from Refinitiv.
Shares of Netflix popped 4% ahead of the streaming company’s earnings report scheduled for after the close. Later in the week, Tesla, United Airlines, American Airlines, Snap, Twitter and Verizon are among those scheduled to report.
Meanwhile, a stronger dollar weighed on the results of some companies. Shares of IBM fell more than 6% after the tech company lowered its forecast for cash flow, with IBM finance chief Jim Kavanaugh citing the U.S. dollar and a suspension of business in Russia. Still, the company reported results that beat Wall Street’s earnings and revenue estimates.
Johnson & Johnson shares declined 1% after the pharmaceutical giant blamed a stronger dollar while cutting its full-year revenue and profit guidance. The company reported better-than-expected top and bottom line results.
So far, roughly 9% of S&P 500 companies have reported calendar second-quarter earnings. Of those, about two-thirds have beaten analyst expectations, FactSet data shows.
Wall Street is betting that stocks have mostly priced in a downturn after their sharp declines this year, though some advisers continued to recommend investors hold on to cash and prepare for more losses ahead.
“[While] I acknowledge sentiment is bad and we could see a large, tactical rally, I am currently more concerned about protecting downside than missing upside, in the aggregate,” Wedbush analyst Kevin Merritt wrote in a Tuesday note.
On Monday, the Dow shed more than 200 points to end the day in the red, reversing a morning rally fueled by solid earnings reports from Goldman Sachs and Bank of America.
Late in Monday’s session, stocks were dragged down on a Bloomberg report that Apple would slow hiring and spending on growth next year to prepare for a potential economic downturn. Shares of the iPhone maker ended the day about 2.1% lower.
“Trading is likely to remain very choppy, with more bear market rallies, in the months ahead,” Wolfe Research’s Chris Senyek wrote in a Tuesday note.
