Stocks Bounce Back In Choppy Trading; Dollar Rises: Markets Wrap

(Bloomberg) -- US stocks held gains in a volatile session as investors parsed the latest corporate news while geopolitical risks jostled sentiment. The euro fell, and the dollar caught bids, ahead of a confidence vote in Italy. 

The S&P 500 rose 0.5% after trading little changed. Tech stocks briefly pared gains after Google said it will pause hiring for two weeks. Still, gains in Netflix Inc. on better-than-feared earnings underpinned rallies in streaming peers Walt Disney Co. and Paramount Global, while Tesla Inc. rose ahead of its earnings set for release later Wednesday.

The euro tumbled as Italy’s Prime Minister Mario Draghi appeared set to fall in a confidence vote after three key parties announced they wouldn’t support him.

Stocks are up for a third day in four amid optimism over the saidearnings season and growing speculation markets may have bottomed out. While that debate continues, with Sanford C. Bernstein strategists saying markets have yet to see full capitulation, rates markets have discarded bets the Federal Reserve will hike rates by a full percentage point next week, bolstering optimism the central bank will take a more measured approach to policy tightening.

“The fact that companies are showing a certain resilience to the current environment is reassuring market operators who have now started betting on a less aggressive monetary tightening than initially expected,” said Pierre Veyret, a technical analyst at ActivTrades. “Even if we’re not out of the woods yet, more and more traders now tend to believe the worst is behind for equity markets this year.”

Treasuries were mixed, with the short-end, the most sensitive to Fed policy changes, bid higher. The dollar gained against most of its G-10 peers.

Risk sentiment also took a hit earlier on news the European Union is preparing for a scenario where Russia halts gas exports to retaliate against sanctions over its invasion of Ukraine. Russian President Vladimir Putin signaled Europe will start getting gas, but warned that unless a spat over sanctioned parts is resolved, flows will be tightly curbed.

Read more: EU Proposes 15% Cut in Gas Consumpticrude oilon on Russian Supply Concern

West Texas Intermediate crude oil pared losses, trading around $104 a barrel. Bitcoin gained for a third straight day, rising above $24,000 for the first time in more than a month.

More market commentary

• “While I hope markets have bottomed, and I hope extreme pessimism can result in capitulation, it’s my job to point out the underlying factors behind market moves, and the bottom line is neither the economy nor corporate earnings have felt the full brunt of Fed tightening,” Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, said in a note.
• “Netflix earnings can be interpreted that the US consumer can be doing a little bit better than anticipated,” said Ellen Hazen, chief market strategist and portfolio manager at F.L.Putnam Investment Management.
• “Without Fed support from the corner, selling pressure has been severe and finally reached the washed-out level readings we have been watching for since the S&P 500 first broke down from its head and shoulders top formation,” Craig Johnson, chief market technician at Piper Sandler, said in a note.

How far will the Fed go in this hiking cycle? It takes one minute to participate in the confidential MLIV Pulse survey, so please click here to get involved. 

Key events to watch this week:

• Earnings this week include Tesla
• Bank of Japan, European Central Bank rate decisions. Thursday
• Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 2:36 p.m. New York time
• The Nasdaq 100 rose 1.4%
• The Dow Jones Industrial Average was little changed
• The MSCI World index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.5% to $1.0175
• The British pound fell 0.2% to $1.1972
• The Japanese yen was little changed at 138.25 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.04%
• Germany’s 10-year yield declined two basis points to 1.26%
• Britain’s 10-year yield declined four basis points to 2.14%

Commodities

• West Texas Intermediate crude fell 1.9% to $102.26 a barrel
• Gold futures fell 0.6% to $1,717.30 an ounce

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