U.S. stocks finished higher on Wednesday, handing the Dow Jones Industrial Average and S&P 500 another round of record closes as investors eyed favorable corporate-earnings reports.

How stock indexes traded

  • The Dow Jones Industrial Average
    DJIA
    closed 156 points, or 0.4%, higher at 38,677.36, based on preliminary data. It ended above its previous record close of 38,654.42, set last Friday.

  • The S&P 500
    SPX
    finished 40.83 points, or 0.8%, higher at 4,995.06 after touching an intraday high of 4,999.89 — just shy of the 5,000-point mark. It surpassed its previous record close of 4,958.61, also set last Friday.

  • The Nasdaq Composite
    COMP
    ended up by 147.65 points, or 1%, at 15,756.64.

What drove markets

U.S. stocks rose on Wednesday as traders gradually came to terms with the likely prospect of having to wait until May for an interest-rate cut by the Federal Reserve. Wall Street refocused its attention on corporate prospects as the earnings season trundles on, with investors looking for assurance that profits can support a market that’s now at fresh record highs.

On Wednesday, Uber Technologies Inc. 
UBER,
+0.26%
cleared Wall Street’s bar for the company’s earnings by reporting fourth-quarter revenue that rose to $9.9 billion from $8.6 billion in the same quarter last year. CVS Health Corp. 
CVS,
+3.10%
 beat fourth-quarter profit expectations by a wide margin but lowered its full-year outlook. PayPal Holdings Inc. 
PYPL,
-0.74%,
 Walt Disney Co.
DIS,
-0.15%
and Arm Holdings PLC
ARM,
+5.52%
 are set to report after the close.

Corporate-earnings growth is holding up despite a period of sharply rising interest rates and has been the primary driver behind the latest equity rally, according to Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta, which oversees $2.5 billion.

“Investors are taking heart in well-received earnings reports and are settling into [Federal Reserve Chair Jerome] Powell’s message, which has moved away from ‘higher-for-longer’ rates to ‘higher-for-not-that-much-longer’ rates,” Buchanan said via phone on Wednesday.

Investors continued to scrutinize the exposure of regional banks to the commercial-real-estate sector. Moody’s Investors Service downgraded the credit of New York Community Bancorp Inc.
NYCB,
+6.67%
 by two notches late Tuesday, lowering it into speculative-grade or “junk” status.

See: New York Community Bancorp’s stock closes at lowest level in 27 years as Yellen says she’s ‘concerned’ about commercial real estate risks

The bank’s shares finished up by 6.7% after the lender named an executive chair and said total deposits have increased in the last several weeks. Meanwhile, the SPDR S&P Regional Banking exchange-traded fund
KRE
fell 0.2%.

Dec Mullarkey, managing director at SLC Management, said the markets are “less alarmed” by the NYCB jitters, as other regional banks have already reported “sensible numbers,” and their earnings reports don’t reflect accelerating weakness in the commercial-real-estate sector.

With interest rates likely to start coming down later this year — giving some breathing room to regional banks — the fact that they’re not all under pressure at the same time makes it a manageable issue, Mullarkey told MarketWatch via phone.

The U.S. Treasury’s record $42 billion sale of 10-year notes was met with solid demand Wednesday afternoon, leaving the 10-year Treasury yield BX:TMUBMUSD10Y to finish at 4.108%.

In U.S. economic updates, the trade deficit widened slightly in December, to $62.2 billion.

Meanwhile, Federal Reserve officials made another round of appearances. Fed governor Adriana Kugler said it would be “appropriate” to lower U.S. interest rates if inflation continues to slow and that it is “critical” that inflation returns to the central bank’s target of 2%. Richmond Fed President Tom Barkin told MarketWatch that it’s a good idea for the Fed to take its time with rate cuts.

Companies in focus

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