U.S. stocks rose sharply Tuesday and are on track to record their best session for nearly a month. The dollar fell, while corporate earnings have generally surpassed expectations.
What is stock trading?
The Dow Jones Industrial Average
The number of people who visited 31,780 was up 704 or 2.3%.
The S&P 500
This rose 100 points (or 2.6%) to 3,931.
The Nasdaq composite
The trade closes at 11,697 after a rise of 340 points (or 3%).
The Dow Jones Industrial Average lost 0.7% or 216 points Monday. This erases a gain of over 350 points earlier. The S&P 500 and Nasdaq Composite each fell 0.8%. The S&P 500 has fallen six of the last seven sessions and has shed 19.6% year-to-date.
What’s driving markets
Analysts suggested that investors may be more pessimistic than usual, which could signal a contrarian signal and allow for potential upside in the near term. Bank of America conducted a monthly survey that showed global fund managers are at their worst since 2008.
Kristina Hooper, chief global market strategist at Invesco, told MarketWatch that stocks were well-positioned for a rebound as corporate earnings reports haven’t been as gloomy as many had feared, while the easing of the dollar has added to tailwinds for U.S. stocks.
“We haven’t heard doom-and-gloom prognostications just yet,” Hooper said, describing the general tone of corporate earnings reports as the second quarter reporting season moves past the big banks.
Hooper reports that stocks also have benefitted from the decrease in long-term inflation expectancies as shown in sentiment data released by the University of Michigan late last week.
After Monday’s report indicating Apple, the mood was more positive Tuesday
Slowing spending and hiring was a sign of a slowing economy, which raised concerns about rising borrowing costs and rising inflation that were threatening corporate confidence. However, International Business Machines Corp. reported “strong” results, which weighed on the company’s shares even as they appeared to bolster the outlook for stocks. The earnings outlook for Tuesday was mixed.
Tuesday’s rally, on track to potentially be the largest daily gain for stocks since June 24, was led by the tech-heavy Nasdaq Composite, as megacaps Apple AAPL Alphabet GOOG GOOGL bounced back from Monday’s losses. All of the S&P 500’s 11 sectors were in the green, with communication services, financials, industrials and consumer discretionary sectors up 3% or more.
Looking ahead, investors are awaiting earnings from Netflix Inc. Investors will want to see if the company’s outlook for subscriber growth has improved following a Wall Street Journal report that the company is engaging with potential advertisers for a planned lower-cost advertising-subsidized tier of content.
Read: Netflix is doing everything possible to reverse the slide in subscribers
Underpinning sentiment, however, and helping deliver gains on Tuesday, is a mostly positive second-quarter earnings reporting season, where 57% of those companies to have reported so far have beaten earnings per share and revenue expectations, according to S&P Global Market Intelligence.
However, the results were not received well. Although the tech company exceeded expectations, worries about how a strong US dollar might impact future earnings led to 6.1% drop in stock.
In the meantime, the dollar lost ground against the euro due to reports that the European Central Bank plans to raise interest rates by 50 basispoints this week, rather than the initial 25 it indicated. The euro EURUSDOn Tuesday afternoon, the dollar rose 0.5%.
The U.S. bond markets are also showing concern about economic growth. Investors have increased 2-year yields as the Federal Reserve tightens monetary policy. BX:TMUBMUSD02Y Over 10-year yields BX:TMUBMUSD10YAn inversion on the yield curve, which is thought to be a warning sign of possible recession. The curve remained inverted Tuesday despite Treasury yields increasing by four basis point.
Data from the United States showed that housing starts dropped 2% and building permits fell 0.6% in June. Companies in focus
Companies in focus
Shares Johnson & Johnson
The stock fell after the consumer and pharmaceutical health products company reported second quarter profit and sales that exceeded expectations. This offset a lower full-year earnings outlook.
Aerospace and defense contractor Lockheed Martin Corp.
on Tuesday reported second-quarter results that missed analysts’ profit and sales estimates. The shares fell 0.1%.
Shares Arista Networks Inc.
rose 3.9% after a Needham analyst upgraded the stock to buy from hold Tuesday, citing the company’s comparatively low international exposure and strong financial position.
shares climbed 1% after the toymaker’s earnings per share beat analyst expectations, though its revenue for the previous quarter were below expectations.
What are the other assets doing?
U.S. crude futures
gained 1% to trade near $100 a barrel following reports that Russia’s Gazprom had claimed force majeure on some buyers highlighted tensions in the energy space.
The ICE Dollar index
Close to $22,590 was traded, up 1.3%
Asia markets were mixed following Wall Street’s overnight reversal. Hong Kong’s Hang Seng
Shanghai Composite dropped 0.9%
It was flat. Japan returned from a rest day to catch up. The Nikkei 2225
Adding 0.7% Stoxx 600 in Europe
rose 1.4% and London’s FTSE 100
Increased by 1%