US stocks extend gains following solid earnings reports

Stocks on Wall Street are extending their gains in afternoon trading Wednesday as investors review a mostly encouraging batch of quarterly earnings from several big companies.

The S&P 500 rose 1.7% as of 3:02 p.m. Eastern. The Dow Jones Industrial Average rose 453 points, or 1.4%, to 32,850 and the Nasdaq rose 2.7%.

Indexes have more than recouped losses earlier in the week. Technology companies, retailers and communications companies were some of the biggest winners. Only energy sector stocks fell, dragged down by lower oil prices.

Smaller company stocks also gained ground, pushing the Russell 2000 1.4% higher.

Investors cheered a report on the services sector, which makes up the bulk of the U.S. economy. The sector grew faster than expected in July, according to the Institute for Supply Management.

“That just provides people with more evidence that this economy is hanging in there,” said Jeff Buchbinder, equity strategist for LPL Financial. “At this point, we have a combination of evidence that inflation is coming down.”

The yield on the 10-year Treasury rose to 2.75% from 2.73% late Tuesday.

Earnings remain in focus this week as investors parse the latest results and statements from companies to better understand how inflation is affecting businesses and consumers.

Drugstore chain CVS rose 6.4% after reporting solid financial results and raising its profit forecast for the year. Starbucks rose 4.6% after also reporting solid financial results. Nearly three-quarters of companies within the benchmark S&P 500 have reported earnings for the latest quarter and the results have mostly beaten analysts' forecasts.

Several companies, though, have slipped amid disappointing results. Taco Bell owner Yum Brands fell 1.7% following a weak earnings report and online dating service company Match Group lost about a fifth of its value after giving investors a weak financial forecast.

PayPal jumped 8.9% on a report that activist investor Elliott Management has taken a large stake in the payment company.

Robinhood Markets, whose stock trading app helped bring a new generation of investors to the market, rose 11.9% following an announcement that it’s cutting nearly a quarter of its workforce. Crashing cryptocurrency prices and a turbulent stock market have kept more customers off its app.

Oil prices fell following OPEC's decision to boost production in September at a much slower pace than previous months. U.S. crude oil fell 4% to settle at $90.66 per barrel, while Brent crude, the international standard, settled 3.7% lower at $96.78 per barrel.

The pullback in oil prices weighed on energy sector stocks. Hess fell 3.2%

Markets are also watching for potential economic fallout from China after U.S. House Speaker Nancy Pelosi’s visit to Taiwan. China claims self-ruled Taiwan as part of its territory, and banned imports of Taiwanese citrus fruits and frozen fish in retaliation for Pelosi's visit. But it has avoided disrupting the flow of computer chips and other industrial goods, a step that could jolt the global economy.

Upcoming data on the jobs market could help investors determine how the Federal Reserve will move ahead with its interest rate policy, which has been aggressive in an effort to try and tame inflation. U.S. jobless claims numbers for last week will be released Thursday, and the government issues its July jobs report on Friday.

“Expectations for Fed rate hikes maybe got a little bit too aggressive,” Buchbinder said. “We don't know if we get a pause by year end, but there's a decent chance we get a signal for a pause by year end.”