Most Stocks Up As Earnings Kick Off

DAMIAN J. TROISE

The Associated Press

NEW YORK - Most U.S. stocks rose on Wednesday, but indexes petered out to a mixed finish as momentum weakened following an encouraging start to what's expected to be a thunderous earnings reporting season.

The S&P 500 fell 16.93 points, or 0.4%, to 4,124.66, a day after returning to an all-time high. It flipped between small gains and losses several times through the day.

The Dow Jones Industrial Average rose 53.62 points, or 0.2%, to 33,730.89 after rising above its record set last week earlier in the day. The Nasdaq composite lost an early gain to drop 138.26, or 1%, to 13,857.84.

The market was held back by drops for several heavyweight tech stocks, including Apple and Amazon, but the majority of stocks within the S&P 500 rose. Smaller companies also rallied amid growing optimism as COVID-19 vaccines roll out and businesses reopen. The Russell 2000 index of small-cap stocks climbed 18.79, or 0.8%, to 2,247.72.

Shares of Coinbase Global, an exchange for bitcoin and other digital currencies, surged in their market debut, perhaps a defining moment for cryptocurrencies as they get embraced more by the mainstream.

Its stock opened at $381, after the Nasdaq earlier gave it a $250 reference price. It quickly rallied toward $430 before closing at $328.28. At that price, investors say the company is worth more than $85 billion, more valuable than Nasdaq or Intercontinental Exchange, the owner of the New York Stock Exchange.

Interest in and prices for cryptocurrencies have been exploding recently as more companies and investors get involved. Coinbase turned a profit last year after more than reversing a $30.4 million loss from the year before, and it expects growth to continue because it sees the cryptoeconomy producing "a more fair, accessible, efficient, and transparent financial system for the internet age."

Energy stocks were also among the market's strongest on expectations that a resurgent economy will burn more petroleum products. The International Energy Agency raised its forecast for oil demand this year, up by 230,000 barrels per day to 96.7 million. A separate U.S. government report also showed that the amount of oil supplies in inventories fell sharply last week.

That helped benchmark U.S. crude oil rise $2.97 to settle at $63.15 per barrel. Brent crude, the international standard, climbed $2.91 to $66.58 a barrel. Within the S&P 500, Diamondback Energy was one of the top-performing stocks with a gain of 6%. Occidental Petroleum rose 5.2%.

Much of the market's focus in coming weeks will be on earnings season, as companies line up to report how much profit they made during the first three months of 2021. Expectations are very high, and this may be the best quarter of earnings growth for S&P 500 companies in more than a decade.

Big banks are traditionally among the first companies to report, and Goldman Sachs, JPMorgan Chase and Wells Fargo all unveiled earnings for the first quarter that blew past analysts' forecasts. Much of the surge was due to expectations for a rapidly improving economy, which allowed banks to free up reserves held in case loans went bad, as well as strong trading revenue.

The better-than-expected results didn't give all the bank stocks a uniform pop, though. Goldman Sachs rallied 2.3%, but JPMorgan Chase fell 1.9%. Wells Fargo jumped 5.5%, but only after swerving from an early-morning loss to a gain.

Stocks in recent earnings seasons have been failing to get as big a bounce as they usually do after reporting better-than-expected results. Analysts say it's likely a result of how much stock prices have already rallied on expectations for the strong growth. The S&P 500 has soared roughly 85% since hitting a bottom in March 2020, even as the pandemic crunched profits for companies through last year.

Wednesday's encouraging start to earnings season dovetails with several reports showing the economy is kicking into a higher gear as more widespread COVID-19 vaccinations and tremendous financial support from the U.S. government and Federal Reserve work through the system.

The expectations for a stronger economy, though, are also leading to worries about higher inflation. If inflation were to climb and sustain itself, it could send bond prices tumbling, erode profits for companies and trigger volatility across markets worldwide.

A report on Tuesday said that U.S. consumer prices rose more in March than economists expected, but investors largely took it in stride.

"The market can handle a higher interest rate level if it's coupled with an improving growth backdrop," said Jack Janasiewicz, portfolio strategist at Natixis Investment Managers. Low rates engineered by the Federal Reserve have been one of the central reasons for the stock market's surge over the last year.

The yield on the 10-year Treasury rose to 1.63% from 1.62%.

Fed Chair Jerome Powell said again on Wednesday that the central bank will hold off on raising interest rates until the job market has fully healed, inflation has reached 2% and indications show inflation is on track to stay moderately above 2% for some time. The Fed also released its latest "Beige Book" survey, which showed businesses around the country feeling more optimistic about the economy.