Strong profits and the economy are driving stocks higher

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Wednesday’s drop in the stock market was short-lived, like a marathon runner taking a break to have a drink before setting off again.

“Yesterday’s weakness does not alter medium- and long-term uptrends, and we believe it will only prove to be a pullback within a longer-term uptrend,” Piper Sandler said in a note.

After the Dow Jones Industrial Average rose 0.79% on Wednesday, breaking that barrier again and closing at 43,077.70.

The S&P 500 climbed 0.47% and the Nasdaq Composite 0.28% added.

The markets are shining in the glow of a positive earnings season so far. About 80% of the 50 S&P companies that reported earnings beat expectations, according to FactSet data.

Morgan Stanleyfor one, reported third-quarter numbers that beat profit and revenue estimates. The bank’s profit rose 32% year over year, easily beating the LSEG estimate and outpacing the income growth of several other major banks.

The investment banking business was a major source of profit for Morgan Stanley. With the support of the Federal Reserve as it begins its interest rate cutting cycle, initial public offerings and mergers and acquisitions are emerging from hibernation and revitalizing Wall Street banks.

Morgan Stanley rose 6.5% after the results. The SPDR S&P Bank ETF is up more than 6% in the last five trading days. In another sign the rally is extending, the bank ETF has outperformed the S&P 500’s gain of less than 1% over the same period.

“We assume that the macroeconomic environment and the earnings environment will remain favorable,” says UBS, “which supports remaining invested in stocks.”

With monetary easing, a continued strong economy and cooling inflation – import prices fell 0.4% in September, according to the U.S. Labor Department – stocks appear to have the staying power to continue rising.

— CNBC’s Hugh Son, Alex Harring, Jeff Cox, Lisa Kailai Han and Jesse Pound contributed to this story.