Wall Street heads for second straight day of solid gains in volatile week

Matt Ott
| Associated Press Press Agency

Wall Street stocks rose sharply on Wednesday as concerns about a weakening U.S. economy took a back seat to a succession of mostly strong corporate earnings reports.

S&P 500 futures rose 1%, while Dow Jones Industrial Average futures rose 0.8%. Tech-heavy Nasdaq futures rose 1.3%.

Japanese markets also clawed back most of their losses from Monday’s wipeout. The nation’s Nikkei 225 index ended 1.2% higher after a Bank of Japan official suggested the central bank would refrain from raising interest rates while markets were volatile.

Walt Disney Co. said Wednesday it returned to profitability in the third quarter as the entertainment giant’s combined streaming business turned a profit for the first time. Its shares were broadly unchanged before the bell.

Shopify jumped 18% after the online commerce software maker posted strong results and raised its outlook. The Canadian company reported second-quarter revenue growth of 21% from the previous quarter and said it expected similar growth in the current quarter.

CVS Health shares were largely unchanged after the retail pharmacy and health care giant cut its 2024 guidance for a third time. CVS continues to struggle with its health insurance business, with operating income from that segment falling 39%. CVS said its segment leader, executive vice president Brian Kane, has left the company.

Airbnb shares fell more than 14% after the company reported a 15% drop in second-quarter profit and told investors it saw some signs of slowing U.S. demand. The online vacation rental booking company’s revenue outlook disappointed investors.

The S&P 500 rose 1% on Tuesday, snapping a brutal three-day losing streak. It fell just over 6% on a range of concerns, including fears that the Federal Reserve has been holding the U.S. economy back too much and for too long with high interest rates to beat inflation.

The Dow Jones index rose 0.8% and the Nasdaq was up 1%.

Stocks of all kinds rose in the opposite direction from the day before, from smaller companies that rely on spending by American households to massive multinationals that are more dependent on the global economy.

While there have been concerns that the U.S. economy may be slowing too quickly, it is still growing. Many economists believe a recession in the next year or so is unlikely. The U.S. stock market has also continued to grow at a healthy pace this year, and the Federal Reserve says it has plenty of room to cut interest rates to help the economy.

In Europe, the German DAX index rose 1% at midday as a rise in industrial production in June offset concerns about weaker-than-expected exports.

The CAC 40 in Paris gained 1.4%, while London’s FTSE 100 rose 1.1%.

The Nikkei index rebounded during the day but eventually gained more than 400 points to close at 35,089.62. It rose more than 10% on Tuesday, recouping much of the losses suffered on Monday, which was its worst day since 1987.

The gains came after a Bank of Japan official said that while the central bank had raised interest rates from 0.1% to 0.25% a week earlier, monetary policy remained loose.

The rate hike, while modest, set off a domino effect of selling by traders to adjust for higher carry costs — a favorite of hedge funds and other investors — due to higher interest rates and the Japanese yen’s appreciation against the U.S. dollar. That exacerbated the slide, especially in Tokyo.

In a talk with business leaders on the northern island of Hokkaido, Shinichi Uchida, vice president of the Bank of Japan, acknowledged that recent market turmoil was partly fueled by concerns about the outlook for the U.S. economy, and said he believed the U.S. would have a “soft landing” and avoid a recession.

He added that the Japanese central bank can afford to wait and “will not raise interest rates when financial and capital markets prove unstable.”

Uchida’s comments “acted as a financial security blanket, calming jittery markets and effectively signaling continued protective intervention,” Stephen Innes of SPI Asset Management said in a commentary.

The dollar rebounded against the yen early Wednesday, jumping to 147.01 yen from 144.32 yen late Tuesday. A weaker yen typically helps earnings for export producers who make most of their revenues overseas, and the yen rose sharply after last week’s interest rate hike after recently trading at a nearly four-decade low of 160 yen to the dollar.

Also Wednesday, China said its exports rose 7% in July from a year earlier. That was well below most economists’ forecasts of nearly 10% and the slowest pace of growth in three months. It also reflected a low base. Exports rose 8.6% year over year in June, much more than expected.

Hong Kong’s Hang Seng Index closed 1.4% higher at 16,877.86. The Shanghai Composite Index rose 0.1% to 2,869.83.

South Korea’s Kospi index rose 1.8% to 2,568.41 and Taiwan’s index rose 3.9% – both markets were among the biggest losers in Monday’s sell-off, driven by a heavy weighting of technology stocks, which have been among the biggest losers in recent weeks.

Australia’s S&P/ASX 200 index rose 0.3% to 7,699.80 points.

In other trading on Wednesday, U.S. crude oil gained $1.66 to $74.86 a barrel. Brent crude, the international standard, also gained $1.66 to $78.14.

The euro fell to $1.0921 from $1.0928.