Strong quarterly earnings reports from bellwether names in the financial and transportation sectors helped offset continued weakness in chip stocks to send markets higher on Wednesday. Energy retreated on sliding oil prices, while small-cap stocks caught a bid.
Markets rebounded from the previous session's drawdown despite continued pressure on most semiconductor stocks. ASML (ASML, -6.4%), a critical Dutch supplier of advanced chipmaking technology, slashed its sales outlook Tuesday, sparking a rout in the sector.
Nvidia (NVDA), the world's second-most-valuable publicly traded company after Microsoft (MSFT), bounced back 3.1% on Wednesday. That helped lift global indexes even as much of the semiconductor sector continued to slump.
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"NVDA now has the largest weighting in the MSCI All-Country World Index, more than all but 2 countries (U.S. and Japan)," write Nicolas Colas and Jessica Rabe, co-founders of DataTrek Research. "Having the right call on this one stock has become a global, not just U.S., investment challenge."
Although Nvidia was able to rebound thanks in part to its exposure to artificial intelligence (AI), chipmakers that supply automotive and industrial customers continued to struggle. Applied Materials (AMAT), for example, fell 3.4%, while KLA (KLA) declined 3.6%.
Earnings to the rescue
Third-quarter earnings season ramped up in a big way, with more key financial firms releasing results. They didn't disappoint. A day after Goldman Sachs (GS) exceeded Wall Street's estimates, Morgan Stanley (MS) did its own part to boost sentiment.
Shares in Morgan Stanley popped 6.5% – MS' biggest gain in almost four years – after the investment bank topped analysts' expectations. Revenue from trading increased 13% versus the prior-year period, while the firm's massive wealth management business generated a record $7.27 billion in revenue. The wealth business also grew net assets by $64 billion.
"Total client assets have surpassed $7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows," CEO Ted Pick said in a statement. "Our business model is delivering strong returns while accreting capital, producing a return on tangible common equity of 18.2% through the first three quarters of 2024."
Meanwhile, regional lender U.S. Bancorp (USB, +4.7%) likewise topped Street estimates. Financials are in focus over the next two weeks, notes John Butters, senior earnings analyst at FactSet, as "nearly 50% of the S&P 500 companies that are scheduled to report earnings are part of this sector."
Results from Morgan Stanley and UBS helped lift financials, which trailed only utilities among the session's best sectors today. At the closing bell, the blue chip Dow Jones Industrial Average was up 0.8% at 43,077 while the broader S&P 500 added 0.5% to 5,842%. The tech-heavy Nasdaq Composite rose 0.3% to 18,367.
United Airlines keeps flying
Financials weren’t the only stocks in focus on Wednesday. Transports also chipped in, helped by strong third-quarter numbers from United Airlines (UAL, +12.4%).
UAL posted better-than-expected quarterly revenue and earnings and an in-line forecast for the fourth quarter. But what really got the market excited about UAL – and air carrier stocks in general – were remarks from its chief commercial officer about the industry's rapidly improving profitability.
"There's an incredible amount of unprofitable capacity in the U.S. marketplace and we've seen that exiting at a rapid pace starting in mid-August that continues into next year," CCO Andrew Nocella said on a conference call with analysts. "The changes we’ve seen so far are only actually the tip of the iceberg."
UAL's print helped shares throughout the sector, with American Airlines (AAL, +7.2%), Southwest (LUV, +1.4%), JetBlue Airways (JBLU, +2.7%) and Delta Air Lines (DAL, +6.8%) all ending the session with gains.
UAL stock is beating the S&P 500 by more than 50 percentage points year to date, and analysts see more upside ahead. Indeed, the stock scores a rare consensus Strong Buy recommendation, according to data from S&P Global Market Intelligence.
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