Stocks boomed and long-term interest rates fell this morning as Wall Street took another, third look at the Federal Reserve’s latest public comments.
The Dow Jones Industrial Average jumped around 350 points, or 1.4%, to 25144. The broad large-cap S&P 500 and the small-cap Russell 2000 indexes also rose about 1%, while the Nasdaq Composite gained 0.74%.
There was no major corporate news, and overseas markets were mostly down overnight. Stocks gained as the yield on Treasury bonds fell. The yield on the benchmark 10-year Treasury fell 0.025 percentage point, to 2.91%, while the two-year yield was down 0.012 point, to 2.25%.
In the nearly 24 hours since the Fed published the minutes of its January Federal Open Market Committee meeting, the market has now gone through three iterations. First it thought the minutes were dovish, implying that the Fed was going to slow-walk the likely rises in short-term interest rates this year. Then it took a more hawkish view, thinking the minutes had raised the chances would raise rates four times instead of just three. And now, in the third iteration, it is leaning back toward its earlier reading.
Initial jobless claims came in below expectations, hitting a five-year low. Germany’s Ifo Business Climate Index and Great Britain’s gross domestic product came in below expectations. After analyzing fourth-quarter earnings announcements and guidance, FactSet has raised 2018 earnings-growth forecasts to 18% from 10%.
Walmart (WMT) at last rallied after two days of sharp falls, rising nearly 2%, to $93.16. Avis Budget Group (CAR) jumped 12% after fourth-quarter earnings beat expectations.
Chesapeake Soars
Chesapeake Energy (CHK) is soaring more than 25% on Thursday, on the heels of its strong f ourth-quarter earnings.
The energy firm said it earned 30 cents a share, a nickel better than analysts’ estimates, while revenue of $2.52 billion was double the $1.26 billion consensus.
Chesapeake shares were recently up 20.5% to $3.17 following the results.
Chesapeake said that average 2017 production was up 3% year over year, while it jumped 11% in the fourth quarter, adjusted for asset sales. The company closed about $1.3 billion in asset and property sales, and management highlighted Chesapeake’s debt reduction and higher cash flow.
For 2018, Chesapeake says total production should grow about 3%, while oil volumes should increase about 5% year over year.
Even with today’s jump, the stock is down some 19% since the start of the year, and off more than 40% in the past 12 months. —Teresa Rivas
Earnings Bonanza
Speaking of earnings, CFRA’s Lindsey Bell writes that investors could be forgiven for forgetting the fourth-quarter season, given that volatility and bond yields have grabbed much of the market headlines. Still, she writes, corporate earnings are a good reminder of the underlying fundamental strength that’s underpinned the bull market.
Bell notes that the fourth quarter was another strong one—even before any benefit from lower corporate taxes had kicked in—with S&P 500 companies reporting 8.1% sales growth, while their earnings-per-share growth of 15% means that three out of 2017’s four quarters notched double-digit EPS increases.
About three-quarters of S&P 500 companies have beaten consensus estimates this quarter, she notes, above the historic rate of 67%. No other quarter saw a higher rate of upside surprises since 2011.
