The U.S. earnings season got underway on Thursday with gains in Wall Street’s major stock indexes thanks to Tesla and Netflix, but Treasury rates retreated off session highs ahead of statements from Federal Reserve Chair Jerome Powell.
The announcement that Netflix, the streaming service with the most subscribers worldwide, was boosting the cost of certain of its plans in the US, UK, and France caused a 14.5% spike in price. In the third quarter, Netflix added 9 million new customers.
However, Tesla fell 6.5% after the manufacturer of electric vehicles (EVs) failed to meet Wall Street expectations for revenue, earnings, and gross margin in the third quarter.
In addition to expressing uncertainty about the EV manufacturer’s intentions to build a facility in Mexico, CEO Elon Musk expressed concern on Wednesday about the effect that high borrowing rates will have on prospective automobile purchasers.
According to LSEG data, third-quarter profits growth for S&P 500 businesses is currently expected to be 1.6%, down from last week’s forecasts of a 2.2% gain.
The 2-year yield, which best predicts short-term interest rate expectations, was still at a 17-year high of 5.2249%, while the yield on the 10-year note was at 4.9407%, close to the 5% level last seen in 2007. The yields on benchmark Treasury notes declined from session highs.
“I believe the answer to that is yes, that it can in turn create even more volatility,” stated Russell Hackmann, President of Hackmann Wealth Partners. “Will the yield on the 10-year bond break 5%?
“That’s a psychologically important issue that maybe could trigger a real sell off in stocks … you got a jittery market out there.”
Powell is expected to talk at 12 p.m. ET, with more Fed speakers to follow, including Austan Goolsbee of the Chicago Fed, Raphael Bostic of Atlanta, and Patrick Harker of Philadelphia.
Concerns about longer-term interest rate increases were stoked by the surprise decline in the number of Americans submitting new claims for unemployment benefits last week, which pointed to continued robust job creation in the next month.
The S&P 500 was up 3.10 points, or 0.07%, at 4,317.70, the Nasdaq Composite was up 19.44 points, or 0.15%, at 13,333.74, and the Dow Jones Industrial Average was up 16.02 points, or 0.05%, at 33,681.10 at 9:37 a.m. ET.
Among the main S&P 500 sectors, gains were led by information technology and communications services.
Real estate and energy were the top two decliners among the 11 S&P subsectors, with six of them seeing losses.
In terms of profitability, Blackstone fell 4.8% as the largest private equity company in the world’s distributable earnings for the third quarter declined more than anticipated because of a drop in asset sales in its real estate division.
With its second-quarter sales projection slightly below Wall Street forecasts, chip manufacturing equipment company Lam Research saw a 3.7% decline in shares.
Following the casino operator’s higher-than-expected third quarter profit and sales, Las Vegas Sands saw a 4.3% increase in value.
After raising its yearly free cash flow projection, AT&T saw a 6.1% increase in shares.
On the NYSE and the Nasdaq, declining issues outpaced advancers by a ratio of 2.13 to 1 and 1.55 to 1, respectively.
The Nasdaq had five new highs and 114 new lows, while the S&P index saw no new 52-week highs and 22 new lows.