Stocks continued their rebound from nearly oversold levels as traders took solace from a solid start to the corporate-earnings season even as central banks remain on hawkish footing.
After almost giving up all of its gains, the S&P 500 notched back-to-back gains to start the week. Futures extended the advance in late trading after Neflix Inc. delivered a surge in subscribers. Its shares jumped more than 13 per cent as of 4:40 p.m. in New York. The biggest ETF that tracks the Nasdaq 100 advanced more than 1 per cent.
During the cash session, the S&P 500 rose 1.1 per cent and is now up 3.8 per cent in two days. Goldman Sachs Group Inc. climbed on solid results. Apple Inc. rebounded after briefly turning negative on a report it was cutting production of its iPhone 14 Plus.
“Earnings season offers investors the opportunity to focus more on the actual earnings power of corporate America, and less on the machinations of the backward-looking economic data stream,” said Art Hogan, chief market strategist at B. Riley. “A better-than-feared earnings season may well be the catalyst the market needs to see a break in the steady grind lower.”
Upbeat company results, cheaper valuations and U.K. policy reversals have helped buoy risk sentiment. The sentiment on stocks and global growth among fund managers surveyed by Bank of America Corp. shows full capitulation, opening the way for equities to bottom in the first half of 2023.
Still, with headwinds from inflation, risks to the economy and hawkish central banks continuing to confront investors, there’s debate over how durable the gains will prove.
Read: Fed’s Bostic Says Slowing Inflation Best for Long-Run Employment
Some regional Fed directors last month favored raising a key interest rate by a smaller or larger amount than the 75 basis points that policymakers ultimately decided was needed to curb persistent inflation, according to minutes of discount-rate meetings released Tuesday.
“There’s still a strong feeling of a bear-market rally about trading over the course of the last week,” said Craig Erlam, senior market analyst at Oanda Europe Ltd. “The economic landscape looks treacherous and we don’t even know if we’re at peak inflation and interest rate pricing yet. Those are substantial headwinds that will make any stock market rebound extremely challenging.”
Key events this week:
Euro area CPI, Wednesday
EIA crude oil inventory report, Wednesday
U.S. MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
Euro area consumer confidence, Friday
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Some of the main moves in markets:
Stocks
The S&P 500 rose 1.2 per cent as of 4 p.m. New York time
The Nasdaq 100 rose 0.8 per cent
The Dow Jones Industrial Average rose 1.1 per cent
The MSCI World index rose 1.1 per cent
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2 per cent to US$0.9856
The British pound fell 0.3 per cent to US$1.1323
The Japanese yen fell 0.1 per cent to 149.23 per dollar
Cryptocurrencies
Bitcoin fell 1.5 per cent to US$19,227.77
Ether fell 2.2 per cent to US$1,300.61
Bonds
The yield on 10-year Treasuries declined two basis points to 3.99 per cent
Germany’s 10-year yield advanced two basis points to 2.28 per cent
Britain’s 10-year yield declined three basis points to 3.95 per cent
Commodities
West Texas Intermediate crude fell 2.6 per cent to US$83.24 a barrel
Gold futures fell 0.5 per cent to US$1,656.50 an ounce
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