Stocks closed higher across the board on Tuesday on Wall Street as investors were awaiting more company earning reports this week.
The Dow Jones gained 1.1 percent or 337.98 points, closing at 30,523.80. The Nasdaq Composite, which had a “choppy” trading day, closed stronger at 10,772.40, gaining 0.9 percent or 96.60 points.
The S&P rose 1.1 percent or 42.03 points, ending the day at 3,719.98. Around 90 percent of the stocks within the S&P 500 notched gains on Tuesday. Small enterprises also saw gains in stock values. The Russell 2000 closed at 1,755.96, gaining 1.2 percent or 20.20 points.
The stock market has been moving “erratically” throughout the past weeks. Major indices were still in their bearish period on Tuesday, closing lower by 20 percent from their latest highs. Nevertheless, LPL Financial head equity strategist Jeff Buchbinder called the high volatility “normal.”
"High volatility is normal around the bottom of a bear market," Buchbinder said. "One reason we may be seeing markets hang in there a little bit better is that the narrative has switched to earnings from inflation and the Federal Reserve."
Stock exchanges awaiting Q3 earnings reports
This week, a number of companies will publish their earnings reports. The data provide an outlook on the economy to investors. Already published reports revealed that several companies in the U.S. had posted higher earnings in Q3, contributing to the recent gains in the stock market.
Financial institutions generally reported strong Q3 results. Goldman Sachs closed with a 2.3 percent growth on Tuesday after exceeding its Q3 earnings and revenue predictions. Bank of New York Mellon and Bank of America also reported earnings growths on Monday.
The shares for General Dynamics rose 3.8 percent, Raytheon Technologies grew 3.4 percent and Northrop Grumman went up 6.7 percent on Tuesday after reporting stronger quarterly earnings.
Low performers included Johnson & Johnson, which plunged 0.3 percent despite reporting a “solid” quarterly result. The multinational company had a narrowed forecast since the strengthened U.S. dollar had introduced an adverse effect on its international sales.
JPMorgan chief of global macro research Dubravko Lakos-Bujas explained that a strong job market and post-pandemic reopening in the U.S. had contributed to the earnings in Q3 and Q4 this year.
“Equity valuation will likely remain tied to global central bank rhetoric and rates, which is turning incrementally less negative,” Lakos-Bujas said. “As such, we see equities primed for upside into year-end on resilient 2H22 earnings, low equity positioning, very negative sentiment and given more reasonable valuation.”
Fed’s policy
At the end of September, the Federal Reserve tweaked interest rates to tame inflation. Analysts have predicted that the Fed will continue to use this inflation control method until next year. The approach was taken to decelerate the speed of the U.S. economy but put the country at risk of overdoing fiscal policy tightening that might lead to recession.
Buchbinder said that the market would deal with volatility in the near term, but argued that the Fed’s method had worked as “inflation is coming down.”
Data showed that although inflation had been declining in some economic sectors, it remained “stubbornly hot" overall. In the next FOMC meeting at the beginning of November, the Fed is expected to perform a 75-basis-points hike in interest rates for the fourth consecutive time to address the issue.