U.S. markets and stock exchange traded funds gained on Wednesday as a strong third quarter earnings season helped lift sentiment.
The Invesco S&P 500 Equal Weight ETF (RSP), which follows the S&P 500 Equal Weight Index (EWI), gained 0.8% on Wednesday. Meanwhile, the S&P 500 rose 0.4%, the Dow Jones Industrial Average was up 0.4%, and the Nasdaq Composite was 0.1% lower.
U.S. equities were trying to regain ground lost over the past month on mounting concerns over supply chain problems, profit margin pressures, higher wages, and increasing input costs ahead of the earnings season, Reuters reports.
While U.S. companies have pointed to ongoing supply chain problems and higher costs during their earnings calls, corporate America has so far been able to maintain profit margins by passing on costs to customers, Jack Janasiewicz, strategist and portfolio manager at Natixis Investment Managers Solutions, told Reuters.
“Earnings are what matter and thus far what we’ve seen have actually been better than expected. Margins are actually holding up,” Janasiewicz said. “The bar was set pretty low coming into (earnings season) so that makes things a little easier… Things are coming out, so far, better than expected. That’s putting upward pressure on stocks.”
About 14% of S&P 500 companies have reported third-quarter earnings so far. Analysts previously expected earnings for the benchmark index to rise 33% year-over-year for the third quarter. So far, more than 85% of those who reported have topped expectations, according to Refinitiv data.
“Earnings are very good so far across a pretty broad range” of companies, Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management, told the Wall Street Journal. Investors are looking for signs of margin pressure and worries about input costs but “haven’t really seen too much concern” so far.
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