Oct 13, 2022 - Economy & Business

Stocks rise ahead of earnings season

Illustration of a blackboard as a stock chart with someone pointing to it

Illustration: Sarah Grillo/Axios

Stocks snapped a six-day losing streak Thursday after rallying early in the trading session.

Why it matters: Investors largely shrugged off the hotter than expected CPI inflation report and are thinking ahead to earnings season, which kicks off tomorrow morning with big banks including JPMorgan, Morgan Stanley and Wells Fargo.

  • "CPI is a lagging indicator," Jay Hatfield, chief investment officer at Infrastructure Capital Management, tells Axios. Gathering data using surveys is "antiquated," and akin "to using leeches for medicine."
  • Investors also may have been covering their short positions, he adds.
  • Programmatic buying triggered by technical levels could also have been at play today, Bloomberg noted.

One area of continued weakness has been in higher risk stocks including those that service or hold cryptocurrencies such as Coinbase, Block (previously Square) and MicroStrategy.

  • Shares of Coinbase sank 10% at the open before rebounding to close down 1%.
  • Over the past year, the company's stock price has been down more than 73% as investors fled to "old economy names," as Hatfield puts it.

What to watch: That price rout could stabilize, or even reverse, because higher risk stocks do well when markets rally, according to Hatfield.

  • If upcoming earnings were going to be terrible, more companies would have warned for those results already. It's like in blackjack, he says: If you haven't seen aces for the last 50 cards, you might put more money on the table because the odds are in your favor.

Meanwhile, more bearish voices could also be heard today.

  • "The reality is that for the foreseeable future the Fed is locked into a stance of unequivocal hawkishness," James Athey, investment director at abrdn told Bloomberg. "This will support bond yields and the US dollar but it's yet more bad news for equities.”

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