S&P 500 Advanced on Q1 Earnings Indicating Consumer Strength

U.S. stocks and government bond yields gained on Tuesday as investors continue to digest the ongoing first-quarter earnings reports.

Despite rising costs amid inflation and rising rates, profits from big U.S. companies are expected to continue to grow. 

The S&P 500 on Tuesday advanced 1.6% to mark its best day in a month, with its equal-weighted counterpart pulling even farther ahead; the Invesco S&P 500 Equal Weight ETF (RSP) is up 1.77% over a one-day period.

The gains were seen across 10 of the S&P 500’s 11 sectors. Only the energy group, the top-performing sector this year-to-date and in 2021, declined.

I always find the most valuable part of earnings season is the additional color and forward guidance provided on earnings calls. I love to pore over earnings call transcripts, which can give me a sense of key factors such as the strength of the consumer,” Kristina Hooper, chief global market strategist at Invesco, wrote in an insight.

In the past week, some financial services companies have reported during earnings calls that household finances are strong (Synchrony Financial cited the “strength of the consumer” while Ally shared that delinquency increases off the 2021 lows “remain gradual and overall levels remain well below 2019,”) according to Hooper.

“In light of the negativity we are seeing in consumer sentiment readings, it suggests consumers are troubled by inflation but financially sound and capable of spending,” Hooper wrote.

The Bureau of Labor Statistics’ Consumer Price Index (CPI) increased by 8.5% in March compared to one year prior, marking the fastest annual jump since 1981, eclipsing the previous 40-year record high rate of 7.9% in February, the U.S. Bureau of Labor Statistics reported last week.

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