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P&G and Morgan Stanley Earnings Help Stocks Reverse

Robust earnings reports from Procter & Gamble Company (PG) and Morgan Stanley (MS) helped Wall Street reverse course on Tuesday following yesterday’s sell-off.

Procter & Gamble’s Results

Procter & Gamble Company reported solid second-quarter fiscal year 2022 results that beat analyst estimates both on the top and the bottom line. Net sales came at $21.0 billion, an annual rise of 6%. Diluted net EPS was $1.66, up 13% from last year.

“We delivered strong top-line growth and made sequential progress on earnings in the face of significant cost headwinds,” said Jon Moeller, President and Chief Executive Officer. “These results keep us on track to deliver our earnings outlook and to raise estimates for sales growth, cash productivity, and cash return to shareowners.

“Our focus remains on the strategies of superiority, productivity, constructive disruption, and continually improving P&G’s organization structure and culture. These strategies have enabled us to build and sustain strong momentum. They remain the right strategies to deliver balanced growth and value creation.”

Morgan Stanley’s Results

Separately, Morgan Stanley reported financial results that beat analyst estimates. Net revenues came at $14.5 billion for Q4 ended December 31, 2021, up from $13.6 billion last year. Net income applicable to Morgan Stanley was $3.7 billion, or $2.01 per diluted share, up from $3.4 billion, or $1.81 per diluted share, from a year ago.

“2021 was an outstanding year for our Firm, “said James P. Gorman, Chairman and Chief Executive Officer. “We delivered record net revenues of $60 billion and a ROTCE of 20%, with stand-out results in each of our business segments. Wealth Management grew client assets by nearly $1 trillion to $4.9 trillion this year, with $438 billion in net new assets.

“Combined with Investment Management, we now have $6.5 trillion in client assets. Our integrated investment bank has continued to gain wallet share. We have a sustainable business model with scale, capital flexibility, momentum, and growth.”

Piecing It Together

P&G’s financial results were boosted by the company’s dominant market position, which gives the global leader in branded products plenty of power to pass rising supply chain and costs on to consumers. Likewise, Morgan Stanley’s financial results were boosted by a rising interest rate environment and substantial savings of American households.

The strong earnings from the two companies helped ease Wall Street’s fears that the earnings season will be on a shaky start and turn major equity indexes around from Tuesday’s sell-off.

Stocks are now higher, with the Dow Jones up 0.3%, the S&P 500 up 0.6%, and the Nasdaq up 0.9%.

Still, investors should be cautious about jumping into the market, as the primary factor for the recent Wall Street sell-off has been rising interest rates, not earnings. Currently, the benchmark 10year Treasury bond is standing at around 1.85%, the highest it has been in two years, prompting investors to re-think valuations.

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