S&P 500 Climbs Amid Gains in Defensive Stocks: Markets Wrap

(Bloomberg) -- US stocks rose as investors await the next batch of earnings from some of the world’s biggest companies and mull whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data.

The S&P 500 climbed more than 1%, buoyed by gains in health-care stocks. The tech-heavy Nasdaq 100 also rose, paring losses of more than 1%. US-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc.

Earnings remain in focus, with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20% of companies that have reported so far, roughly 58% posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. 

“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” said Andrew Sheets, Morgan Stanley’s chief cross-asset strategist. “But the big picture -- and I don’t think this changes -- is that we still view this as a bear market rally rather than the start of a larger new bull market.”

Fed policy is still a key focus for investors. Reports that the Fed may soon start reducing the size of its rate hikes pushed stocks higher by more than 2% on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. Data Monday indicated that Fed tightening is starting to hit the economy, with purchasing managers indicators showing contraction in the services and manufacturing sectors.

“In our view we’re certainly ‘not out of the woods yet’ but the efforts of the Fed since it pivoted policy to address inflation along with the resilience of the economy in a challenging period -- and some rumbling among Fed speakers that while the rate hike in November may indeed be 75bps, the Fed may not have to be quite as heavy handed in December -- have caught the attention of market participants,” wrote John Stoltzfus, chief investment strategist at Oppenheimer.

Other investors are more cautious in their expectations that the central bank is moderating its rhetoric. 

“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”

The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said. 

A gauge of the dollar strength rose. UK bonds posted some of their biggest gains on record as investors bet incoming Prime Minister Rishi Sunak will restore credibility to economic policy making.

Read More: Yellen Sees Environment Where US Financial Risks Could Emerge

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, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, 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 12:57 p.m. New York time
• The Nasdaq 100 rose 0.8%
• The Dow Jones Industrial Average rose 1.2%
• The MSCI World index rose 1.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro rose 0.1% to $0.9872
• The British pound fell 0.3% to $1.1272
• The Japanese yen fell 0.9% to 148.93 per dollar

Cryptocurrencies

• Bitcoin fell 1.1% to $19,291.47
• Ether rose 0.5% to $1,337.14

Bonds

• The yield on 10-year Treasuries was little changed at 4.21%
• Germany’s 10-year yield declined nine basis points to 2.33%
• Britain’s 10-year yield declined 31 basis points to 3.75%

Commodities

• West Texas Intermediate crude fell 0.6% to $84.57 a barrel
• Gold futures were little changed

--With assistance from and .

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