Stocks Had a Euphoric Day

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Stocks put an exclamation point on Thursday, closing higher across the board after a magical alignment of strong bank earnings, a drop in jobless claims and lower bond yields.

The

Dow Jones Industrial Average
jumped 535 points, or 1.6%, after the index closed flat Wednesday at 34,377. The

S&P 500
advanced 1.7% and the

Nasdaq Composite
rose 1.7%.

“Markets are in rally mode,” said Michael Reinking, chief market strategist at New York Stock Exchange. “Interest rates are pulling back, early earnings reports have been encouraging, there was some better-than-expected economic data.” 

The 10-year Treasury yield dipped to 1.52%. It had spiked to as high as 1.61% from 1.3% in late September, just before the Federal Reserve suggested—and this week essentially confirmed—it would soon start reducing its bond buying. Less money moving into bonds would drag bond prices down, lifting their yields. Higher bond yields make future profits less valuable, hurting stocks. Should bond yields rise at a slower pace, that would be good for stocks. 

“Today, relative stability in the 10-year yield could be a calming message for the equity market,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. 

The producer-price index rose 0.5% month over month, below estimates of 0.6% and lower than the previous reading of 0.7%. The year-over-year increase was 8.6%. Investors want to see that cost increases are slowing for companies. That also means firms can raise prices more slowly, putting less pressure on the Fed to raise interest rates. 

Initial jobless claims fell to 293,000, better than the expected 318,000 and an improvement over last week’s 329,000. Investors want to see that the labor market is continuing to recover, especially after the September employment report was weaker than expected. 

With corporate earnings season in full swing, investors will be particularly attuned to how supply-chain pressures are weighing on company profits. Still, S&P 500 earnings, in aggregate, had beaten estimates by more than 11% heading into Thursday, according to Credit Suisse. Bank earnings are driving much of that result, the bank’s data show, while the other sectors are beating by about 5%.

Bank of America (ticker: BAC) had good numbers. The stock rose 4.5% after the company reported a profit of 85 cents a share, beating estimates of 71 cents a share, on revenue of $22.8 billion, above expectations for $21.8 billion. The firm released $1.1 billion of cash reserves that had been set aside to absorb bad credits. CEO Brian Moynihan said the economy has continued to improve. This was a report similar to that of

JPMorgan Chase & Co. (JPM), which revealed Wednesday that the bank is releasing billions of dollars in reserves and that the economy is on strong footing. 

Wells Fargo (WFC) stock slipped 1.3% after the company reported a profit of $1.17, beating estimates of $1, on revenue of $18.8 billion, above expectations for $18.3 billion. The bank released $1.7 billion of credit loss reserves.

The banks “announced that they are releasing reserved cash that had been set aside for pandemic-related defaults,” writes JJ Kinahan, chief market strategist at TD Ameritrade. “The positive gesture is helping to push stocks higher.” 

Overseas, Hong Kong’s Hang Seng Index fell 1.4% amid a blowout reading of Chinese producer price inflation, while in Europe the regional Stoxx 600 was 1.2% higher.

Here are five stocks on the move Thursday:

Morgan Stanley (MS) stock rose 2.5% after the investment bank reported a profit of $1.98 a share, beating estimates of $1.68 a share, on revenue of $14.8 billion, above expectations for $14 billion. 

Citigroup (C) stock was up 0.7% after the bank reported a profit of $2.15 a share, beating estimates of $1.65 a share, on sales of $17.2 billion, above expectations for $16.9 billion. 

Domino’s Pizza (DPZ) stock initially gained before falling 0.6% after the company reported a profit of $3.24 a share, beating estimates of $3.11 a share, on sales of $998 million, below expectations for $1 billion. 

Walgreens Boots Alliance (WBA) stock rose 7.4% after the company reported a profit of $1.17 share, beating estimates of $1.02 a share, on sales of $34.3 billion, above expectations for $33.3 billion. 

Boeing (BA) stock fell 2 after news broke that the company’s 787 Dreamliner has part defects. 

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