Stocks advanced on Tuesday as investors digested a slew of new earnings results that topped Wall Street's expectations, suggesting more companies were able to work through ongoing supply chain challenges and still generate solid profits.
The Dow gained nearly 200 points, or 0.6%, by the end of the trading day. Component stocks including The Travelers Companies (TRV) and Johnson & Johnson (JNJ) rose after posting stronger-than-expected earnings results, helping fuel the jump in the 30-stock index. The S&P 500 rose for a fifth straight session, marking its longest winning streak since August.
Consumer giant Procter & Gamble (PG) was also among the major companies to post estimates-topping quarterly results Tuesday morning, though the stock fell as the company also flagged the impact of rising materials and shipping prices. P&G said it expected to see $2.3 billion in after-tax expenses during the current fiscal year due to rising commodity and freight costs.
The latest quarterly results, guidance and executive commentary from the broad array of companies still left to report are set to help illustrate the extent of how labor shortages, increasing input costs and lingering pandemic-related concerns have weighed on companies – and whether some firms have managed to more nimbly navigate this confluence of challenges.
"We're dealing with supply chain challenges because of the unique situation that we're in right now, where we've unleashed a lot of demand before businesses were really ready for it. That may persist for some time, drive volatility, raise some concerns," Brian Levitt, Invesco global market strategist of North America, told Yahoo Finance Live on Monday. "But ultimately I think the supply-demand imbalances will moderate, enabling this cycle to move on further."
"What you want to hear from businesses are those that continue to believe that demand is going to be strong, and continue to believe that they have some ability to work through the supply challenges and pass on some of those costs to consumers," he added. "It's not a rising tide that lifts all boats type of environment. It’s an economy that’s likely to slow some in here, and pricing pressures are going to be with us a bit ... Those businesses that can pass on these costs are going to be the winners."
The companies that have so far reported third-quarter earnings results — including the big U.S. banks and an assortment of other names like Domino's Pizza (DPZ) and Delta Air Lines (DAL) — have largely posted better-than-expected profits. Heading into this week, 8% of S&P 500 companies had reported third-quarter results, and 80% of these firms topped consensus estimates, according to FactSet.
And as Savita Subramian, Bank of America's head of U.S. and equity quant strategy, pointed out in a note on Monday, many of these companies had relatively little foreign sales exposure, or less than one-fifth of their overall revenue from international sources. Forthcoming earnings reports from companies with greater reliance international sales may provide an even more comprehensive view of the impact of the global supply chain challenges.
"Supply chain concerns are very, very real," Wells Fargo CEO and President Charles Scharf told Yahoo Finance's Editor-in-Chief Andy Serwer during a panel at the Milken Institute Global Conference on Monday. "Inventory levels are down, and people are finding ways to compensate for that. So profit levels overall are very, very strong because people are raising prices, so there is inflation how long that goes on for we can debate, but it is very real."
"The supply chain problems aren't going to get solved overnight," he added. "They will get solved, but until then, I certainly worry about the evenness of [whether] small businesses versus large businesses be able to continue on the same trajectory."
4:05 p.m. ET: S&P 500 posts fifth straight day of gains in longest winning streak since August
Here's where the three major indexes closed out the session:
S&P 500 (^GSPC): +33.17 (+0.74%) to 4,519.63
Dow (^DJI): +198.7 (+0.56%) to 35,457.31
Nasdaq (^IXIC): +107.28 (+0.71%) to 15,129.09
2:50 p.m. ET: Global Fund Managers are the least bullish since Oct. 2020: BofA
Bullishness among global fund managers fell to its lowest level in a year as expectations for economic and corporate profit growth deteriorated, according to Bank of America's latest Global Fund Manager Survey for October.
Global growth expectations turned negative for the first time since March 2020, with the net percentage of survey participants expecting a stronger economy in the next 12 months coming in at negative 6%. Meanwhile, 15% of respondents said they anticipated profit growth would slow, representing the worst outlook since May 2020, BofA added.
Fund managers also set aside more cash amid the weakening outlook. Cash allocations reached a one-year high of 4.7%, according to Bank of America.
9:38 a.m. ET: Bitcoin futures ETF debuts on the NYSE, becoming the first to hit a U.S. public exchange
The ProShares Bitcoin Strategy ETF (BITO) made its trading debut on the New York Stock Exchange on Tuesday to become the first-ever U.S. exchange-traded fund to offer investing in futures of the cryptocurrency.
As a derivatives-based product, the fund allows investors to bet on Bitcoin futures, or expected changes in the price of the token. While this gives traders exposure to the cryptocurrency's price action, it does not enable them to hold Bitcoin directly.
Bitcoin prices jumped amid the debut, clearing $63,000 to near its all-time high.
9:30 a.m. ET: Stocks gain, Dow adds about 100 points, or 0.3%
Here's where markets were trading just after the opening bell:
S&P 500 (^GSPC): +15.19 (+0.34%) to 4,501.65
Dow (^DJI): +98.67 (+0.28%) to 35,357.28
Nasdaq (^IXIC): +42.93 (+0.29%) to 15,065.35
Crude (CL=F): -$0.23 (-0.28%) to $82.21 a barrel
Gold (GC=F): -$0.90 (-0.05%) to $1,767.40 per ounce
10-year Treasury (^TNX): +2.8 bps to yield 1.612%
8:30 a.m. ET: Housing starts unexpectedly declined in September to reach the lowest level since April
New homebuilding sank in September compared to August as labor scarcities and rising prices weighed on construction activity in the housing market.
Starts for new residential construction declined by 1.6% last month, the Commerce Department said in its monthly report Tuesday. This brought starts down to a seasonally adjusted annualized rate of 1.555 million, or the lowest in five months. August's housing starts were also downwardly revised, with these rising by just 1.2% versus the 3.9% increase previously reported. Consensus economists expected housing starts to come in unchanged on a month-over-month basis.
Building permits, which serve as an indicator of future construction, sank by 7.7% in September over the prior month, whereas consensus economists were looking for a drop of just 2.4%. August's building permits were also downwardly revised to show an increase of 5.6%, down from the 6.0% gain reported in the previous print.
7:33 a.m. ET Tuesday: Stock futures extend gains
Here's where markets were trading Tuesday morning:
S&P 500 futures (ES=F): +25.25 points (+0.56%), to 4,502.75
Dow futures (YM=F): +206 points (+0.59%), to 35,339.00
Nasdaq futures (NQ=F): +68 points (+0.44%) to 15,358.50
Crude (CL=F): +$1.06 (+1.29%) to $83.50 a barrel
Gold (GC=F): +$12.40 (+0.70%) to $1,778.10 per ounce
10-year Treasury (^TNX): +0.8 bps to yield 1.592%
6:02 p.m. ET Monday: Stock futures point to a lower open
Here's where markets were trading Monday evening:
S&P 500 futures (ES=F): -1.25 points (-0.03%), to 4,476.25
Dow futures (YM=F): -12 points (-0.03%), to 35,121.00
Nasdaq futures (NQ=F): -0.25 points (-0.00%) to 15,290.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter