By Christine Idzelis and William Watts
U.S. stocks closed higher Tuesday, adding to the largest four-day stretch of gains since late July for both the S&P 500 index and Nasdaq Composite, with companies reporting solid third-quarter earnings despite the spread of the coronavirus delta variant and supply-chain disruptions.
What did major indexes do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.53% rose 198.70 points, or 0.6%, to end at 35,457.31.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -2.27% advanced 33.17 points, or 0.7%, to finish at 4,519.63.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -2.23% climbed 107.28 points, or 0.7%, closing at 15,129.09.
What drove the market?
Equities rose as corporate earnings largely overshadow worries about supply-chain disruptions, though investors keep watching for signs that profit margins may be hurt by increased costs for transportation, energy and labor.
According to Bank of America, through the first week, 66% of companies beat Wall Street forecasts on both sales and earnings per share, which is well above the historical average of 47%.
“This earnings season could be highly important for investors, as inflation, labor, supply, and currency risks settle in,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a note. “We expect strong results as earnings reports so far indicate that many large U.S. companies have generated higher profitability despite rising labor costs, thanks to sustained sales growth.”
Results came in ahead of the opening bell from Dow components Procter & Gamble Co. /zigman2/quotes/202894679/composite PG -0.80% , Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -0.65% and Travelers Cos. Inc. /zigman2/quotes/206313935/composite TRV -3.34% , while streaming giant Netflix Inc. /zigman2/quotes/202353025/composite NFLX +1.12% reported after the close.
“We don’t have a clear picture yet” of the extent inflationary pressures may be weighing on profit margins, said Jon Maier, chief investment officer of Global X, in a phone interview Tuesday. He pointed to Procter & Gamble’s report as a sign of the headwinds that companies may be facing from higher freight and commodity costs.
Meanwhile, in U.S. economic data, construction on new homes has slowed amid supply-chain woes . U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.56 million in September, a 1.6% decrease from the previous month, the U.S. Census Bureau reported Tuesday. The pace of permitting for new housing units also slowed in September, dropping 7.7% from August.
In a speech Tuesday on the U.S. economic outlook, Federal Reserve Gov. Christopher Waller said gross domestic product growth saw “a significant slowdown” in the third quarter as the delta variant of the coronavirus caused consumers and businesses to pull back. He said GDP “should rebound in the first half of 2022.”
On the crypto front, the first U.S. bitcoin futures exchange-traded fund from ProShares began trading on the New York Stock Exchange Tuesday under the ticker BITO /zigman2/quotes/230440344/composite BITO -6.13% . Shares of the ETF rose 4.9% to close at $41.94.
Bitcoin BTCUSD was up more than 4% after the closing bell Tuesday, at around $64,166. The cryptocurrency is trading near an all-time high.