Traders are comparing strong corporate earnings to data showing the US economy contracted last quarter.
U.S. stocks rose as traders considered the strength of corporate earnings on data showing the U.S. economy unexpectedly contracted last quarter.
The tech-heavy Nasdaq 100 climbed 2%, led by gains from Meta Platforms Inc. after its main social network Facebook added more users than expected. PayPal Holdings Inc. rose on better-than-expected earnings, while Qualcomm Inc. led U.S. chip stocks higher. The S&P 500 rose 1.3% and the Stoxx Europe 600 index gained 0.7%.
Thursday’s relief rally punctuates a week of nerves marked by China’s fight to suppress Covid, Russia’s war in Ukraine and fears that the Federal Reserve’s monetary tightening could tip the US economy into a recession .
“The earnings season as a whole has delivered more good news than bad and may help investors focus on the macro headwinds that have hit major indexes this month,” said Chief Strategist Art Hogan. markets at National Securities. Of the 140 S&P 500 companies that have reported so far, 77% have exceeded their earnings estimates and 65% of reporters have raised their forecasts for the full year, pushing up overall expectations in earnings for members of the S&P 500, according to Hogan.
The results of Amazon.com Inc. and Apple Inc. due Thursday will be watched closely given their outsized influence on US stock indexes. Twitter Inc., in one of its last earnings reports before Elon Musk took the company private, missed analysts’ revenue estimates, reflecting a slowdown in advertising.
A contraction in gross domestic product data, the first since 2020, could be a worrying sign for traders as a soaring trade deficit and weaker inventory growth undermine an otherwise strong picture of consumer demand and companies.
This is “not a solid starting point for the real economy which will face a much tighter monetary policy environment as the Fed proceeds with rate hikes,” BMO’s Ian Lyngen wrote of the news. first quarter GDP printout. “The Fed only issued one 25 basis point hike.”
Treasuries reversed the gains, with the yield on the benchmark 10-year rising to around 2.84%.
Oil prices were little changed, with West Texas Intermediate futures reversing earlier advances to trade above $101 a barrel.
And in currency markets, the yen’s fall to a 20-year low could signal a rewrite of the global currency playbook. The offshore yuan sank, the euro retreated along with the pound and the ICE dollar index hit a two-decade high.
The Nasdaq’s average daily movement over the past 100 trading days hit nearly 1.6%, the highest reading since the early days of the pandemic, according to Bespoke Investment Group. There have only been four other periods that have recorded such daily volatility on average – besides the pandemic, these include the dot-com meltdown, the crisis of 2008 and 2011. “Volatility as we saw it over the past four months doesn’t happen very often,” Bespoke Strategists wrote in a note.
In Europe, natural gas prices fell after two days of gains as buyers considered options for continuing to source supplies from Russia without violating sanctions. European Union members are pushing the bloc to provide clearer guidance on Russia’s demand for ruble payments, and Germany has signaled it is open to a phased ban on Russian oil imports.
Events to watch this week:
- Tech revenue includes Amazon, Apple
- EIA Petroleum Inventory Report, Wednesday
- US 1Q GDP, weekly jobless claims, Thursday
- The ECB publishes its economic bulletin on Thursday
Some of the major movements in the markets:
- The S&P 500 rose 0.9% at 9:35 a.m. PT
- The Nasdaq 100 rose 1.5%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.8%
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 0.6% to $1.0498
- The British pound fell 0.9% to $1.2435
- The Japanese yen fell 1.8% to 130.70 per dollar
- The yield on 10-year Treasury bills rose one basis point to 2.84%
- Germany’s 10-year yield rose nine basis points to 0.89%
- The UK 10-year yield rose five basis points to 1.86%
- West Texas Intermediate crude fell 0.3% to $101.71 a barrel
- Gold futures fell 0.1% to $1,886.80 an ounce
–With the help of Isabelle Lee, Cecile Gutscher, Charlotte Yang, Macarena Munoz, Andreea Papuc and Kat Van Hoof.