Upbeat Earnings and Data Give Stocks a Leg Up…..

U.S. equities rallied following a host of earnings reports from the Financials sector as Q3 earnings season kicks into gear. Bank of America headlined the earnings calendar after posting strong results. In other earnings news, Morgan Stanley, Citigroup, Wells Fargo, and Walgreens also topped the Street’s profit and revenue forecasts, while Domino’s Pizza posted mixed results. News on the economic front was also upbeat to add to sentiment, as jobless claims fell more than expected to below the 300,000 mark for the first time since the pandemic began, and wholesale price inflation, while remaining elevated, came in slightly cooler than anticipated. Treasuries were higher and the U.S. dollar ticked lower, while crude oil prices rose, and gold added to yesterday’s rally. Europe finished broadly higher, likely getting a boost from the upbeat U.S. data, while markets in Asia were mixed.

The Dow Jones Industrial Average jumped 535 points (1.6%) to 34,913, the S&P 500 Index advanced 74 points (1.7%) to 4,438, and the Nasdaq Composite rallied 252 points (1.7%) to 14,823. In moderate volume, 795 million shares were traded on the NYSE and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.87 to $81.31 per barrel. Elsewhere, the gold spot price rose $3.70 to $1,798.40 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.1% to 93.95.

The Producer Price Index (PPI) showed prices at the wholesale level in September rose 0.5% month-over-month (m/m), below the Bloomberg consensus estimate calling for a 0.6% gain, and south of August’s 0.7% increase. The core rate, which excludes food and energy, gained 0.2% m/m, below estimates of a 0.5% rise and the prior month’s 0.6% gain. Y/Y, the headline rate was 8.6% higher, just shy of projections of an 8.7% increase and compared to August’s 8.3% gain. The core PPI increased 6.8% y/y last month, south of estimates calling for a 7.1% rise, and following August’s 6.7% increase.

Weekly initial jobless claims came in at a level of 293,000 for the week ended October 9, versus estimates of 320,000 and compared to the prior week’s upwardly-revised 329,000 level. The four-week moving average fell by 10,500 to 334,250, and continuing claims for the week ended October 2 dropped by 134,000 to 2,593,000, below estimates of 2,670,000. The four-week moving average of continuing claims fell by 30,500 to 2,737,750.

Treasuries have steadied after the yield curve steepened as of late with the markets grappling with expectations that the Fed is set to begin to rein in its extraordinary measures put in place to combat the impact of the pandemic, against the backdrop of persisting inflation pressures.

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