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Stocks Rebound Ahead of Big Tech Earnings Week: Market Recap

(Bloomberg) – US stocks rose in a late-day reversal as bottom buyers emerged ahead of a busy week for Big Tech earnings.

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The S&P 500 rallied in a choppy afternoon session to end near the day’s highs, after falling to lows near the 4,200 level. The tech-heavy Nasdaq 100 climbed more than 1%. Twitter Inc. extended its earnings after billionaire entrepreneur Elon Musk agreed to buy the social networking platform. Alphabet Inc., Apple Inc., Amazon.com Inc. and Meta Platforms Inc. are all due to report later this week.

The gains followed falling stocks in Europe and Asia as China’s Covid outbreak continued to heighten fears of faster Federal Reserve tightening. Fears of broader restrictions in Beijing are spooking investors who are already worried about the risk of a global slowdown as the Fed raises rates to tame inflation.

“The rebound shows stocks weren’t ready to test year-to-date lows,” John Lynch, chief investment officer at Comerica Bank, said in an email. “Last week’s selloff was an overreaction to Powell’s comments.”

A broad gauge of Chinese stocks fell to the lowest in nearly two years as policymakers put some areas of the capital on lockdown amid the government’s unwavering adherence to its Covid-zero policy. U.S. stocks also fell last week after Fed Chairman Jerome Powell outlined his boldest approach yet to rein in soaring prices and the European Central Bank signaled deeper tightening.

“This week could easily be a fork in the road to equities,” JC O’Hara, chief market technician at MKM Partners, wrote in a note. “We have almost a third of the S&P 500 and half of the Dow Jones to report. The upside drivers will confirm or deny what the challenging macro backdrop has given us over the past three weeks.”

A flight to safe havens sent global government bonds higher, as the yield on the US benchmark fell seven basis points. The dollar extended a lead, while the euro fell even after Emmanuel Macron’s victory in the French election removed a key risk for the markets. Gold lost nearly 2% and WTI crude oil fell 3% to below $99 a barrel.

Monday’s pullback from soaring commodity prices since Russia’s invasion of Ukraine did little to ease worries about runaway inflation.

Read more: Inflation scare gripping global markets won’t stop

“We continue to believe that U.S. and global equities will not bottom until markets stop discounting ever more aggressive Fed rate policy,” wrote Nicholas Colas, co-founder of Data Trek Research. “It’s not that the current news flow is bad. The problem is that the range of potential economic outcomes is too wide to predict with certainty future corporate profits.

Events to watch this week:

  • Technology revenue includes Alphabet, Meta Platforms, Amazon, Apple

  • EIA Petroleum Inventory Report, Wednesday

  • CPI Australia, Wednesday

  • Bank of Japan monetary policy decision, Thursday

  • US 1Q GDP, weekly jobless claims, Thursday

  • The ECB publishes its economic bulletin on Thursday

Some of the major movements in the markets:

Shares

  • The S&P 500 rose 0.6% at 4 p.m. PT

  • The Nasdaq 100 rose 1.3%

  • The Dow Jones Industrial Average rose 0.7%

  • The MSCI World index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%

  • The euro fell 0.7% to $1.0714

  • The British pound fell 0.8% to $1.2740

  • The Japanese yen rose 0.4% to 128.03 per dollar

Obligations

  • The yield on 10-year Treasury bills fell seven basis points to 2.83%

  • Germany’s 10-year yield fell 13 basis points to 0.84%

  • The UK 10-year yield fell 12 basis points to 1.84%

Merchandise

  • West Texas Intermediate crude fell 2.9% to $99.06 a barrel

  • Gold futures fell 1.8% to $1,900 an ounce

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