Investing.com -- U.S. stocks rose strongly Wednesday, boosted by the return of risk appetite although sentiment remains fragile.
At 09:35 ET (13:35 GMT), the Dow Jones Industrial Average rose 225 points, or 0.6%, the S&P 500 jumped 66 points, or 1.2%, and the NASDAQ Composite surged 260 points, or 1.5%.
Risk sentiment was boosted Wednesday by comments from a senior Bank of Japan official downplaying the bank's plans to raise interest rates while markets remain volatile.
The BOJ's rate hike of 25 basis points late last month had sparked a global stocks rout as investors unwound their positions based on carry trades.
Market stress elevated
That said, sentiment towards risk-driven assets remained frail amid persistent concerns over slowing growth and middling earnings.
Goldman Sachs (NYSE:GS) noted that its Financial Stress Index (FSI) has tightened significantly over the past two days but remains within normal historical levels.
"Most of the tightening has been driven by higher expected volatility in the equity and bond markets, while conditions in short-term funding markets have remained broadly stable,” Goldman economists wrote in the note.
“So while market stress is noticeably higher than a week ago, our FSI suggests that there have been no serious market disruptions to date that would force policymakers to intervene."
Walt Disney sees drop in park profits
There are more earnings to digest Wednesday.
Walt Disney (NYSE:DIS) stock fell almost 3% after the entertainment giant reported a drop in profits at its Experiences segment that includes parks and consumer products, which makes up just over half of profit, even as its Entertainment unit, with the combined streaming businesses of Disney+, Hulu and ESPN+, posted a profit for the first time.
Shopify (NYSE:SHOP) shares soared 17% after the e-commerce platform beat expectations for quarterly revenue, as its artificial intelligence-powered tools helped pull in more merchants to its e-commerce services.
Super Micro Computer (NASDAQ:SMCI) stock fell 13% after the data center operator's June quarter earnings missed estimates, raising more concerns over just how much demand the artificial intelligence industry was generating.
Airbnb (NASDAQ:ABNB) stock fell 14% after the house rental company forecast third-quarter revenue below estimates and warned of shorter booking windows, suggesting travelers were waiting until the last minute to book due to economic uncertainty.
The resilience of S&P 500 earnings remains intact despite growing recession fears and recent negative price action, Citi strategists said in a Wednesday note.
The bank’s Citi Economic Data Change index, which summarizes US macro data trends, is indicating further deterioration for the U.S. economy.
But interestingly, while economic data was weak in 2022, S&P 500 earnings growth remained flat rather than severely negative, as rolling earnings recessions mitigated the overall index impact.
Overall, the strategists maintain confidence in their $250 EPS forecast for the S&P 500 in 2024, which is slightly higher than the current bottom-up consensus of around $243.
"But even that level of earnings, if not somewhat lower, would still represent significant improvement over 2023,” strategists argued.
“While not locked in by any means, with Q2 reports mostly behind and most corporates essentially halfway through Q3, we struggle to see earnings expectations moving materially lower than current consensus."
"The bigger issue will be with 2025 earnings should more pronounced macro slowing unfold during the remainder of this year. But, again, we expect more resilience versus history."
(Ambar Warrick contributed to this article.)