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The S&P 500 Makes a Comeback. The Funk Is Coming to an End.

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Macro concerns such as supply-chain issues appear to be on the back burner amid earnings season.

Brendan Smialowski/AFP via Getty Images

The S&P 500 ended Wednesday a touch below its all-time closing high, seizing on strong corporate earnings in a sign that it is shaking itself out of a monthlong funk

The Dow Jones Industrial Average rose 152 points, or 0.4%, and needs less than a 10th of a percentage point to reclaim its all-time closing high; the Nasdaq Composite dipped 0.1%.

Like the Dow, the S&P 500 rose 0.4%. The index, which had five consecutive sessions of gains under its belt, closed at 4,536.19, just below the the all-time high of 4,536.95 that it hit on Sept. 2.

From that day six weeks ago, the S&P 500 fell by a bit more than 5% through Oct. 4. Supply chain constraints, which create higher costs for companies and hamper their ability to meet sales goals, prompted analysts to revise earnings estimates lower. Bond yields also popped as long-term inflation expectations are high, making future profits less valuable, which lowers stock valuations. 

Now, a rally partially driven buy retail traders—those who transact on popular platforms like Robinhood and TD Ameritrade—have bought the dip. 

The S&P 500’s furious rise has moved it past key technical levels, as a breadth of stocks have participated in the rally. This indicates investors are feeling better about the economic and market outlook — and that the recent drawdown is in the rear view mirror.

Corporate fundamentals look—for the moment—strong. 

“Earnings season has been better than expected so far and that has been the main driver of the strong performance in the broader stock market over the past week,” wrote Tom Essaye, founder of Sevens Report Research. 

Earnings season continued apace Wednesday, with Abbott Laboratories (ticker: ABT), Verizon (VZ), Biogen reporting Wednesday morning—they all beat—following Netflix (NFLX) and United Airlines (UAL) results Tuesday evening.

Aggregate earnings per share results for S&P 500 companies have beaten analysts expectations by 16%, according to Credit Suisse. Excluding financials—banks had particularly impressive results—the rest of the market is beating estimates by about 6%. Investors have begun to look past supply chain constraints, which are causing costs to surge, as analysts have at least partially reflected those costs in their forecasts. To be sure, if supply chain difficulties persist, earnings estimates could still fall from here.

The yield curve expanded slightly on Wednesday. The 10-year Treasury yield rose to 1.65%, while the 2-year yield dipped slightly to 0.38%. The widening gap between the two suggests investors see strong economic growth and inflation in the long-term, while near-term inflation may not rise too much.

Bank stocks flourish the most when the yield curve expands because they can lend at higher interest rates and borrow at low short-term rates, boosting profitability. The SPDR S&P Bank Exchange-Traded Fund (KBE) gained 2.3%. Other economically-sensitive stocks, as seen by the Dow’s movement, were also performing well.

Rising bond yields usually hurt technology stocks because higher yields make future profits less attractive and many fast-growing tech companies are betting on big profits well into the future. Tech stocks largely declined Wednesday, while about a quarter of S&P 500 stocks were on the rise, according to FactSet.

Yields could continue rising, with many on Wall Street calling for the 10 year yield to move above 1.7% soon.

Tesla (TSLA) and IBM (IBM) are among the companies releasing financial results after the closing bell.

Meanwhile, Bitcoin prices touched an all-time high above $66,400. The leading cryptocurrency has been buoyed by the launch of the first exchange-traded fund tracking regulated Bitcoin futures—a landmark moment for the crypto industry. 

Trading in the ProShares Bitcoin Strategy ETF (BITO) began Tuesday and most of the substantial volume was driven by high-frequency traders and retail investors, according to analyst Jeffrey Halley of broker Oanda.

“Although a regulated ETF based on regulated futures does fit nicely into the mandates of many in the institutional space, I suspect they may wait a while before dipping their toes in the water,” Halley said.

Here are 6 stocks on the move Wednesday:

Novavax (NVAX) dropped 15% following a report alleging that manufacturing problems jeopardize billions of Covid-19 vaccine doses set to be delivered to low- and middle-income countries.

Verizon (VZ) gained 2.5% after the company reported better-than-expected earnings.

Netflix (NFLX) stock fell 2.2% despite reporting better-than-expected earnings after Tuesday’s close. The stock was downgraded to Hold from Buy at Deutsche Bank.

United Airlines (UAL) stock was down 0.6%—after having risen just after earnings Tuesday—after the company reported a loss of $1.02 a share, better than estimates of a loss of $1.67 a share, on sales of $7.8 billion, above expectations for $7.6 billion. The company said that travelers are resuming flights, and that it is optimistic about the future. “We’re solidly on track to achieve the targets we set for 2022,” United Airlines CEO Scott Kirby said in the company’s press release. “From the return of business travel and the planned reopening of Europe and early indications for opening in the Pacific, the headwinds we’ve faced are turning to tailwinds.”

Alibaba (BABA) stock rose 0.2% on reports that it would make its own chips and that Jack Ma would be traveling to Europe.

The U.S.-listed shares of Dutch semiconductor equipment manufacturer ASML (ASML) fell 4.2% after the company outlined revenue guidance for the next quarter below Wall Street’s estimates.

Corrections & amplifications: The S&P 500’s Wednesday close was its second-highest on record. An earlier version of this article incorrectly said the index hit a new closing high.

Write to Jacob Sonenshine at [email protected]