Stock Market Today: Dow Spikes 754 Points Despite IBM, J&J Earnings Slumps

Stocks shot higher out of the gate Tuesday – and never looked back.

Despite a mixed batch of corporate earnings reports and lackluster housing data, today's rally was broad-based, with all 11 sectors gaining ground. Communication services (+3.6%) led the way, with Netflix (NFLX (opens in new tab), +5.6%) a notable advancer ahead of tonight's Q2 earnings release.

As for reports traders could act on today, tech company International Business Machines (IBM (opens in new tab), -5.3%) and healthcare giant Johnson & Johnson (JNJ (opens in new tab), -1.5%) both beat on the top and bottom lines in the second quarter. However, shares of the blue chips fell after the companies said a stronger U.S. dollar will negatively impact some full-year financial metrics (free cash flow for IBM; earnings and revenue for JNJ).

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And on the economic front, data from the Commerce Department showed housing starts dropped 2% in June to a seasonally adjusted annual rate of 1.559 million units. Permits for future building declined by 0.6% to an annualized rate of 1.685 million units. Both figures arrived at their lowest level since September 2021.

"Builders appear to still be having trouble completing new projects amid ongoing material and labor shortages," says Mark Vitner, senior economist for Wells Fargo. Still, "slower pace of residential construction, less supply chain congestion and lower material prices should help builders complete projects at a faster pace in coming months," he adds.

Nevertheless, the Nasdaq Composite ended the day up 3.1% at 11,713, with the S&P 500 Index (+2.8% at 3,936) and Dow Jones Industrial Average (+2.4% at 31,827) not far behind.

Other news in the stock market today:

• The small-cap Russell 2000 soared 3.5% to 1,799.
• U.S. crude futures gained 1.6% to finish at $104.22 per barrel.
• Bitcoin benefited from the day's burst of buying power, gaining 8.4% to $23,411.09. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Arista Networks (ANET (opens in new tab)) jumped 4.2% after Needham analyst Alex Henderson upgraded the cloud networking solutions company to Buy from Hold. "Arista is one of the most insulated from macro pressures in the sector, as we see it," Henderson says. "It has a heavy focus on Cloud. Its core customers Microsoft (MSFT (opens in new tab)) and Facebook/Meta (META (opens in new tab)) are spending aggressively to support their cloud infrastructures and longer-term plans." He adds that ANET is "the kind of name to own as the economy weakens and international markets soften even more."
• Hasbro (HAS (opens in new tab), +0.7%) on Tuesday said higher prices and solid demand for its "Magic: The Gathering" card game helped the toymaker bring in earnings of $1.15 per share in its second quarter, more than analysts were expecting. However, revenue of $1.34 billion fell short of the $1.37 billion Wall Street pros were anticipating. "Q2 adjusted operating profit was up 200 basis points [a basis point is one-one hundredth of a percentage point] to 18.0% as the company was able to more than offset higher freight and input costs with operating leverage, spending less on advertising and SG&A," says CFRA Research analyst Zachary Warring (Buy). "Inventory ballooned 74% year-over-year and sits well above historical levels. We are a little worried about inventory levels but still see HAS as the leader in the space with a strong strategic plan."
• After the close, Netflix said it lost fewer-than-expected subscribers in the second quarter (970,000 vs. 2 million est.). The streaming service also reported higher-than-anticipated earnings of $3.20 per share, while revenue of $7.97 billion fell short of the consensus estimates. At last check, NFLX stock is up 8.2% in after-hours trading.

Gold Stocks to Consider

Gold was expected to have a strong year, based on its history as a hedge against inflation. However, that hasn't turned out to be the case, with gold futures down 6.4% for the year-to-date.

So what's pulling gold lower? "The U.S. dollar," says John LaForge, head of real asset strategy at Wells Fargo Investment Institute. The U.S. dollar index is up 12.4% for the year-to-date to trade at levels not seen since 2002, and that is creating a drag on dollar-denominated commodities like gold. Still, LaForge isn't spooked by gold's price struggles, and thinks with "gold being quite cheap versus most other commodities, investors may begin to buy."

And a cooling U.S. dollar could spark more interest in the precious metal. Indeed, gold futures gained 0.5% today to settle at $1,710.70 an ounce as the U.S. dollar index notched its third straight decline, ending down 0.6%.

Continued upside for the precious metal could spell good news for gold stocks, which have fallen in sympathy with the commodity. But which ones stand out? Check out our list of Wall Street's favorite gold plays, which analysts see having major upside.