US stocks rose on Tuesday as traders assessed a slew of corporate earnings and weighed risks to economic growth from the Federal Reserve raising interest rates to combat inflation.
(Bloomberg) — US stocks rose on Tuesday as traders assessed a slew of corporate earnings and weighed risks to economic growth from the Federal Reserve raising interest rates to combat inflation.
The S&P 500 and the Nasdaq 100 climbed, extending Monday’s strong performance. Among companies reporting Tuesday, The Coca-Cola Co., General Motors Co. and United Parcel Service Inc. rose after beating analysts’ earnings estimates, while General Electric Co. and Invesco Ltd. dipped after falling short. Alphabet Inc., Microsoft Corp. and Visa Inc. are among major companies still reporting today.
US Treasuries stabilized after an earlier rally, with the 10-year yield around 4.08%. The dollar dropped after data on Tuesday showed that home-price growth in the US slowed the most on record as high borrowing costs sapped demand.
About a quarter of S&P 500 companies have reported earnings so far, with more than half outperforming estimates. Still, some investors are concerned the effects of a slowing economy will be seen further down the line, especially after manufacturing and services data on Monday showed that Fed tightening has already started to weigh on the economy.
US consumer confidence also fell on growing concerns about the broader economic outlook. The Fed is still set to raise interest rates next week, but investors are starting to speculate that it may be approaching the end of its aggressive tightening campaign.
The tech sector is particularly vulnerable to further interest-rate hikes because of its reliance on more distant profits, said Mark Haefele, chief investment officer at UBS Global Wealth Management. This week’s big-tech earnings will show investors whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins.
Any potential positive earnings surprise is unlikely to lead to a sustained rallied in risk assets, said Bipan Rai, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce. If it does, “then it would work against what the Fed is trying to engender, which are tighter financial conditions to suppress aggregate demand,” Rai said.
Analysts are also expecting a jumbo hike of 75 basis points from the ECB on Thursday, even as many economists now reckon a recession has begun in the euro region. German business confidence improved in October, data showed Tuesday, though remained at depressed levels as Europe’s largest economy heads into a challenging winter.
US-listed Chinese stocks rebounded Tuesday after losing about $93 billion of market value in a historic selloff that pushed the shares to their lowest level in over nine years. President Xi Jinping’s power grab has raised concerns that concentrated decision-making could weaken growth and destabilize geopolitics.
“We’re certainly staying away from the Chinese market right now because the political scene is not favorable,” Laila Pence, president of Pence Wealth Management, said in an interview on Bloomberg TV. “There’s a lot less risk in the US and just as much upside.”
Elsewhere in markets, the British pound gained as Rishi Sunak formally took over as UK prime minister on Tuesday, vowing to “fix” the mistakes made by his predecessor, Liz Truss.
Key events this week:
- Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, Vale, Visa, Volkswagen
- US Conference Board consumer confidence, Tuesday
- Bank of Canada rate decision, Wednesday
- ECB rate decision, Thursday
- US GDP, durable goods orders, initial jobless claims, Thursday
- Bank of Japan policy decision, Friday
- US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.1% as of 11:19 a.m. New York time
- The Nasdaq 100 rose 1.6%
- The Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 rose 1.2%
- The MSCI World index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.8%
- The euro rose 0.9% to $0.9964
- The British pound rose 1.7% to $1.1471
- The Japanese yen rose 0.7% to 147.80 per dollar
Cryptocurrencies
- Bitcoin rose 1.3% to $19,637.98
- Ether rose 3.4% to $1,397.41
Bonds
- The yield on 10-year Treasuries declined 16 basis points to 4.08%
- Germany’s 10-year yield declined 15 basis points to 2.18%
- Britain’s 10-year yield declined 10 basis points to 3.64%
Commodities
- West Texas Intermediate crude rose 1.3% to $85.72 a barrel
- Gold futures rose 0.4% to $1,660.80 an ounce
–With assistance from Richard Henderson, Allegra Catelli and Emily Graffeo.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
