All three major indexes added to their gains after Tuesday’s rally, with tech stocks leading the gains.
At Wednesdays close, the S&P 500 was up 0.6%, the Dow was up 0.2%, and the Nasdaq had gained 1.6%. These gains were in addition to the rally Tuesday which saw gains of 2% across the board.
Many of the highest flyers were tech stocks which have been hard-hit this year. Unity Software (U) and Shopify (SHOP) gained more than 12% on Wednesday, while Coinbase (COIN) was up more than 14%, and crypto overall extended recent gains.
Investors were also focused on earnings reports, as Netflix opened the season, reporting it had lost fewer users than analysts expected. Netflix had been expected to lose 2 million users in the second quarter, but only reported losing 970,000. Although investors were relieved, it did mark the second straight quarter of declines for the streaming service.
Netflix rose 7% Wednesday off the news, holding most of the gains from after-hours trading Tuesday after the news broke. Netflix had gained as much as 10% after-hours on Tuesday, which has been taken by investors as indicating that in this environment, bad news that is not as bad as expected will be seen as good news.
It may not work that way for all companies, however. Wednesday, Biogen (BIIB) raised its full year profit outlook before the bell, however shares went on to fall 5.8% over the day.
Abbott Labs (ABT) dropped 1.5% after reporting an over 7% decline in sales in its nutrition unit, due to a baby-formula recall. Even so, Abbott raised its earnings forecast for the year.
Scott Brown at LPL Research noted Wednesday, that even amid a rush of bad news, the S&P 500 rose 6% since June 16th. He also noted that on Tuesday, breadth in the market, or the amount of stocks rising versus those falling, was the best it had been on the New York Stock Exchange since January of 2019.
Brown wrote, “The Tuesday reading saw advancers outnumber decliners by more than 14:1 on the NYSE, and that comes on the heels of a nearly 8:1 reading on Friday, which at the time was the best reading since May of this year… …days like Tuesday are exactly what we are looking for, and can go a long way towards changing the character of this market.”
On Tuesday, Bank of America Global Research released its latest fund managers survey, which investors look to as a gauge of investor sentiment. The headline of the report was, “I’m so bearish, I’m bullish.”
The report described a, “dire level of investor pessimism,” which had expectations for profits and growth at record lows, equity allocations lower than they have been since the collapse of 2008, and cash balances at a record not seen since 9/11.
However it appears given such a bleak outlook, investors are focusing on the silver linings in every cloud.
