Dow jumps more than 100 points to record on better-than-expected earnings, surpassing August high

The Dow Jones Industrial average jumped to a record on Wednesday as investor sentiment was boosted by better-than-expected earnings reports and a new record for bitcoin.

The Dow Jones Industrial Average gained 172 points, or 0.5%, to about 35,630 and hit an intraday record high during the session. The 30-stock average would need to close above 35,625.40 to break its record from mid-August. The S&P 500 added 0.3% and was just less than 0.2% from its own record. The Nasdaq Composite retreated 0.1%.

The market climbed a wall of worries over the last two months. Fears over the delta Covid surge, supply chain hiccups, a China property crisis, the Federal Reserve signaling the removal of stimulus and surging inflation reports rattled investors. But the Dow’s pullback from records was not that severe, reaching about 5% at its lowest closing point.

Sam Stovall, chief investment strategist at CFRA, said the market was continuing its rally from last week, which he said started with a weaker than expected PPI reading and better than expected bank earnings.

“That kicked off this rally,” Stovall said. “I think it’s a combination of earnings. It is month-over-month changes in inflation that looks like it is peaking out and the effect of the Covid variant is slowing down.”

Stovall pointed out that the S&P 500 could also hit a record high, which would be a bullish sign for the market going forward.

“History shows that stock market advances following the recovery from pullbacks recorded an average price gain of 8.4% over the following 98 calendar days before slipping into a new decline of 5% or more. Favorable seasonal factors should also help power the market to additional new highs,” Stovall said about the S&P 500.

Verizon was the biggest gainer in the Dow, jumping 2.5% after earnings topped estimates for the third quarter and the telecom giant raised its forecast because of growing 5G adoption. Biotech Biogen shares edged higher after it beat estimates on earnings and revenue and raised its full year guidance.

More than 70 S&P 500 components report earnings this week and so far reports are going very well. Through Tuesday, 86% of the S&P 500 companies reporting have topped estimates, according to figures from The Earnings Scout. Third-quarter earnings are on pace for a 35% increase from a year ago, according to Earnings Scout. IBM, Tesla, CSX and Las Vegas Sands are among the names set to report after the market closes.

Bitcoin rose as high as $66,893 Wednesday, a new all-time high for the cryptocurrency, following comments Paul Tudor Jones made on CNBC’s “Squawk Box” calling bitcoin his preferred inflation hedge over gold. Bitcoin has been climbing for four weeks amid positive regulatory developments and anticipation of the first bitcoin-linked ETF. The ProShares Bitcoin Strategy ETF began trading Tuesday.

The bitcoin rally is a signal of a strong risk-on environment, according to Fundstrat’s Tom Lee, who also said the stock market could still rally more than 6% by the end of the year despite the “jagged year of progress” it’s had. He upped his S&P 500 price target 100 points to 4,800, citing declining Covid cases and economic resilience.

“We believe a strong risk-on environment is underway,” Lee said in a note to investors late Tuesday. “We do not think consensus is that bullish. We already know that investors got very pessimistic in September… However, the improvement in market technicals, such as clearing the 50-day moving average, is actually suggesting that underlying trends are getting stronger.”

Netflix posted its hotly-anticipated third-quarter earnings report on Tuesday after the market closed, with the streaming giant adding 4.4 million subscribers during the period. Wall Street analysts expected 3.84 million additions, according to estimates from StreetAccount. However, the shares, which are up 20% in the last three months, were down more than 1%.

Deutsche Bank downgraded Netflix after the report, saying its stock valuation was hard to justify with revenue growth set to slow next year. The firm also said strong fourth quarter subscriber additions are already baked into the stock.

United Airlines also posted quarterly results after the bell on Tuesday, with the company beating analyst expectations on the top and bottom line amid an ongoing rebound in travel demand. United shares rose slightly Wednesday.

Ford shares were up nearly 4% after Credit Suisse upgraded the auto company on its EV shift and predicted a 30% rally in the stock. PayPal lost more than 3% on a report that it could buy the social media company Pinterest. Pinterest shares soared more than 11%.

So far investors have largely cheered results from the batch of third-quarter earnings that have hit the market since the banks kicked things off last week. Of the S&P 500 components that have reported thus far, 82% have topped expectations, according to FactSet.

However, Jeff Buchbinder, equity strategist for LPL Financial, said investors shouldn’t expect the beats that companies posted as they emerged from the depths of the pandemic.

“We have used most of the superlatives we know to describe corporate America’s stunning performances over the past two earnings seasons,” he said. “We expect solid earnings gains during the upcoming third-quarter earnings season, but upside surprises will be smaller. Unfortunately, we won’t need as many superlatives.”

The S&P 500 added 0.74% on Tuesday, while the Nasdaq Composite advanced 0.71%. Both saw their fifth straight day of gains, the longest daily winning streak since late August.

The Dow advanced nearly 200 points, or 0.56%, for its third positive session in the last four days. Johnson & Johnson had the most positive impact on the 30-stock benchmark, while Procter & Gamble was the largest drag.

With stocks’ Tuesday advance, the major averages are approaching their all-time highs. The Dow is 0.49% below its record, while the S&P and Nasdaq Composite sit 0.58% and 1.78% below their highwater marks.

-CNBC’s Jesse Pound and Patti Domm contributed to this report.