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U.S. Stocks Rise on Earnings; Dollar Declines: Markets Wrap

By Vildana Hajric and Kamaron Leach

U.S. equities rose with European stocks this morning as solid corporate earnings helped counter concerns stemming from elevated inflation. 

The S&P 500 gained 0.5 percent with Travelers Cos. and Johnson & Johnson higher after beating estimates while Procter & Gamble Co. fell on commodity and freight costs. Crypto stocks were also in the spotlight as Bitcoin pared back gains alongside a slide in the freshly debuted Bitcoin futures exchange-traded fund (BITO).

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Photo by Anna Nekrashevich from Pexels

Markets are taking comfort from robust earnings while also grappling with the prospect of tightening monetary policy to quell price pressures. The dollar was weaker against major peers as traders raised bets central banks around the world will raise interest rates before the Federal Reserve. Meanwhile, global bond yields were mixed with the U.S. 10-year Treasury yield higher at 1.62 percent.

“Earnings are coming in strong. The economy is still strong. Certainly there has been a weak patch because of Covid. But I think that alleviates, and you’re left with an economy that’s moving higher, earnings that are strong and a 10-year Treasury still settling around 1.60 percent,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth on Bloomberg TV’s Surveillance.

Investors are paying close attention to the earnings season to see how higher costs for energy and raw materials are affecting margins. Crude oil in New York remained volatile Tuesday after it erased earlier gains from when Russia signaled it may not ship extra gas to Europe without approval for the controversial Nord Stream 2 pipeline.

“We do think that corporate America is able to manage through this period of supply chain pressures, whether it’s through finding cost savings, or if they’re able to take that increased revenue and maybe reduce their margins slightly,” Tony Rodriguez, head of fixed income strategy at Nuveen Asset Management, said. “We still think that, at the end of the day, that leaves the credit health of corporate America in very good shape.”

Speakers from the Federal Reserve this week are expected to try to calm the market ahead of plans to begin tapering asset purchases. 

“They’re probably going to be very careful and cautious on rate hikes because of the fact that they just don’t have enough information on the inflation front,” said Subadra Rajappa, managing director and head of U.S. rates strategy at Societe Generale. “That’s why I think you’re seeing a little bit of an adjustment in the two year part of the curve this morning.”

Events to watch this week:

  • Earnings roll in, including from AT&T Inc., Barclays Plc, Netflix Inc. and Tesla Inc.
  • EIA crude oil inventory report, Wednesday
  • China property prices, loan prime rates, Wednesday
  • U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday
  • Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 0.5% as of 10:51 a.m. New York time
  • The Nasdaq 100 rose 0.4%
  • The Dow Jones Industrial Average rose 0.3%
  • The Stoxx Europe 600 rose 0.2%
  • The MSCI World index rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The euro rose 0.3% to $1.1640
  • The British pound rose 0.5% to $1.3797
  • The Japanese yen was little changed at 114.27 per dollar

Bonds

  • The yield on 10-year Treasuries advanced two basis points to 1.62%
  • Germany’s 10-year yield advanced four basis points to -0.11%
  • Britain’s 10-year yield advanced three basis points to 1.16%

Commodities

  • West Texas Intermediate crude rose 0.4% to $82.78 a barrel
  • Gold futures rose 0.4% to $1,772.50 an ounce

More stories like this are available on bloomberg.com,

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