Stocks Extend Gains, Dow Tops 35,000, Dollar Rebounds: What's Driving Markets Wednesday?

U.S. stocks are continuing their rally Wednesday, with the S&P 500 index on track for its seventh positive session in the last eight, reaching levels last seen in early April 2022. The Dow crossed the 35,000 milestone, on track for its fourth straight session of gains.

Strong earnings remain the driving force behind the stock market, while investors eagerly await quarterly results from Tesla Inc. (NASDAQ:TSLA), Netflix Inc. (NASDAQ:NFLX), International Business Machines Corp. (NYSE:IBM) and United Airlines Holdings Inc. (NYSE:UAL), all of which are scheduled to report after the closing bell.

The market is now entering a light week in terms of macroeconomic releases, with only the S&P Global Flash PMI on Monday being in the spotlight before the pivotal event of the Federal Reserve Open Market Committee meeting on Wednesday, July 26.

A lower-than-expected U.K. inflation rate, combined with increased speculation that the ECB may stop raising interest rates after July, created pressures in both the euro and the pound, fueling a rebound in the U.S. dollar index.

Cues From Wednesday’s Trading:

After officially entering a bull market on Tuesday, the Dow Jones Industrial Average continued to outperform other U.S. major averages on Wednesday, rising 0.4% for the day.

The S&P 500 Index gained 0.3%, while the Nasdaq 100 inched 0.1% higher. Small caps in the Russell 2000 edged 0.2% higher.

U.S. Index Performance On Wednesday

Analyst Color:

With early earnings triggering some upside, analysts at LPL said earnings need some heavy lifting to keep the rally going.

"The results on the surface probably won't offer much to write home about given consensus estimates imply a 7% year-over-year decline in S&P 500 earnings per share," said Jeffrey Buchbinder, chief equity strategist, and Quincy Crosby, chief global strategist.

“However, the key question is always what's priced in, which at least offers an opportunity for markets to react positively.”

LPL's best guess, according to the analysts, is “typical upside surprises and guidance reductions,” giving this rally a convenient excuse to take a breather.

Carson Group's Ryan Detrick, who is in the bullish camp, noted a historical trend that is positive for the market.

The Russell 2,000 Index, comprising of small-cap stocks, had a gold cross technical move, i.e. the 50-day simple moving average crossing over above the longer-term 200-day moving average.

This has happened 17 times in history and the market was higher three months later all the 17 times, BeSpoke's analysis showed, Detrick tweeted.

Wednesday’s Trading In Major US Equity ETFs: In midday trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) was 0.2% higher to $455, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose 0.4% to $350 and the Invesco QQQ Trust (NASDAQ:QQQ) was 0.1% lower to $385, according to Benzinga Pro data.

Eight out of the 11 S&P sectors were in the green for the session, except for the Industrials Select Sector SPDR Fund (NYSE:XLI), down 0.2%; the Materials Select Sector SPDR Fund (NYSE:XLB), down 0.6%; and the the Technology Select Sector SPDR Fund (NYSE:XLK), down 0.6%.

The top gainers were the Real Estate Select Sector SPDR Fund (NYSE:XLRE), up 1.2%, and the Utilities Select Sector SPDR Fund (NYSE:XLU), up 1.1%.

Latest Economic Data:

The Mortgage Bankers Association reported that weekly mortgage application rose 1.1% on the week, accelerating from the previous 0.9% increase.

Building permits fell by 3.7% in June 2023, to a seasonally adjusted annual rate of 1.44 million, from a seven-month high of 1.496 million in May and falling shy of market estimates of 1.49 million.

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Stocks In Focus:

• Carvana Co. (NASDAQ:CVNA) rose 28% as the company announced an agreement with bondholders that will reduce its debt by $1.2 billion. Carvana posted second-quarter earnings that topped analyst expectations, despite recording another loss for the quarter.
• AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) and Frontier Communication Parent Inc. (NYSE:FYBR) rose 8.2%, 6% and 22%, respectively, as analysts lowered projections for financial damage to the telecommunications industry due to its lead cable crisis.
• U.S. Bancorp (NYSE:USB) rose 6% after reporting better-than-expected Q2 results.
• Omnicom Group Inc. (NYSE:OMC) tumbled 11.8%, leading the S&P 500’s losers, as the company reported lower-than-expected revenues.
• Northern Trust Corp. (NASDAQ:NTRS) soared 14% after the financial services firm reported substantial net interest income growth in the second quarter.
• Companies reporting after the close include Netflix, Inc., Tesla, Inc., United Airlines, Inc., Alcoa, Inc. (NYSE:AA), Discover Financial Services, Inc. (NYSE:DFS), International Business Machines Corp., Las Vegas Sands Corp. (NYSE:LVS) and Steel Dynamics, Inc. (NASDAQ:STLD).

Commodities, Bonds, Other Global Equity Markets:

Crude oil was flat, with a barrel of WTI-grade crude trading at $75.70. The United States Oil Fund ETF (NYSE:USO) was 0.2% lower to $68.  

Treasury yields were a notch lower, with the 10-year yield down by 3 basis points to 3.75% and the two-year yield down by 1 basis point to 4.76%. The iShares 20+ Year Treasury Bond ETF (NYSE:TLT) was 0.8% higher for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), down 0.4%. The EUR/USD pair, which is tracked by the Invesco CurrencyShares Euro Currency Trust (NYSE:FXE), was 0.3% lower to 1.1193.

European equity indexes had a mixed session. The SPDR DJ Euro STOXX 50 Etf  (NYSE:FEZ) fell 0.9%. 

Gold held steady at $1,977/oz. The SPDR Gold Trust (NYSE:GLD) was flat at $183. Silver rose 0.4% to $25.20, with the iShares Silver Trust (NYSE:SLV) up 0.4% to $23. Bitcoin (CRYPTO: BTC) was 0.4% higher to $29,980.

Staff writer Piero Cingari updated this report midday Wednesday. 

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