Major U.S. stock benchmarks closed sharply higher Tuesday, with gains led by the technology-heavy Nasdaq Composite, as investors weighed whether a raft of corporate earnings results will help markets break out of a recent rut. The stock-market gains also came amid a drop in energy prices.
How did stock indexes perform?
- The Dow Jones Industrial Average DJIA, +1.45% gained 499.51 points, or 1.5%, to close at 34,911.20, snapping two straight days of losses.
- The S&P 500 SPX, +1.61% climbed 70.52 points, or 1.6%, to finish at 4,462.21, snapping two consecutive days of losses.
- The Nasdaq Composite COMP, +2.15% advanced 287.30 points, or around 2.2%, to end at 13,619.66, also snapping two straight days of losses.
On a quiet Monday with several international markets shut, the Dow fell 40 points, or 0.1%, while the S&P 500 edged down 1 point and the Nasdaq Composite lost 0.1%. The S&P 500’s decline marked its seventh fall in the last nine sessions though Monday.
What drove markets?
Major U.S. stock benchmarks posted sharp gains Tuesday, rising amid a busy week for first-quarter earnings reports and a drop in energy prices.
“We’ve got oil and natural gas NGK22, -7.44% down quite a bit today,” which may be behind some of the “enthusiasm” in the market, said Scott Wren, senior global market strategist at Wells Fargo Investment Institute, in a phone interview. West Texas Intermediate crude for May delivery CLK22, -5.27% dropped 5.2% Tuesday to settle at $102.56 a barrel.
Lower energy prices help “consumer discretionary spending,” Wren said, adding that when consumers pay less at the gas pump they have more to spend in other areas of the economy. Energy SP500EW.10, -0.73% was the sole sector showing losses in the S&P 500 index Tuesday, down around 1%, according to FactSet data.
This week is one of the busiest weeks in the U.S. quarterly earnings reporting season, after a raft of banks posted somewhat disappointing first-quarter results last week.
“I would continue to forecast solid profit growth,” despite challenges companies have been facing such as high inflation, said Greg Marcus, managing director at UBS Private Wealth Management, in a phone interview Tuesday.
Johnson & Johnson JNJ, +3.05% headlined the companies reporting ahead of Tuesday’s open, and International Business Machines Corp. IBM, +2.36% and Netflix Inc. NFLX, +3.18% report after the close. Netflix shares have been hammered this year, skidding about 42%, on investor concern about the company’s subscription numbers.
Refinitiv’s S&P 500 earnings scorecard Tuesday estimates blended earnings growth of 6.4% during the first quarter on a year-over-year basis. Excluding the energy sector, the growth rate for the index is 0.8%, the scorecard shows.
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Meanwhile, the International Monetary Fund on Tuesday said the war in Ukraine will lead to a significant slowdown in global economic growth this year, though the institution isn’t forecasting recession or stagflation for the U.S. or Europe.
The IMF said global growth would slow to a 3.6% rate this year, down from 6.1% in 2021 and 0.8 percentage points lower than in the last forecast in January. Still 3.5% growth is in line with long-run trends. The U.S. economy is expected to grow at a 3.7% rate this year, down from the prior estimate of 4%.
See: Fed rate hikes likely not fully priced into financial markets: IMF official
U.S. economic data released Tuesday showed housing starts in March rose 0.3% from February despite high inflation and rising mortgage rates. Housing starts were up nearly 4% compared with March 2021.
“We have a massive shortage of housing in this country,” said Marcus, who is based in Washington, D.C.
As for rising interest rates, Charles Evans, the president of the Federal Reserve Bank of Chicago, said Tuesday during a talk at the Economic Club of New York that the Fed could raise its benchmark rate by increments of 50 basis points at least a few times this years. Evans, who is not a voting member of the bank’s interest-rate setting panel this year, indicated that the fed funds rate could eventually top 3%.
See: Fed’s Evans says key U.S. interest rate to go to 2.5% — and likely higher
Which companies were in focus?
- Shares of Johnson & Johnson JNJ, +3.05% rose slightly more than 3% after the pharmaceutical and consumer products company topped first-quarter profit expectations but missed on revenue, and cut its full-year outlook.
- American Campus Communities Inc. ACC, +12.54% on Tuesday confirmed a report by The Wall Street Journal that it agreed to be acquired by Blackstone Inc. BX, +4.90% in a deal that values the student housing company at about $12.8 billion including debt. American Campus shares jumped 12.5%, while Blackstone shares gained 4.9%.
- Shares of Hasbro Inc. HAS, +5.16% climbed 5.2% after the toymaker missed first-quarter profit estimates.
- Twitter Inc. TWTR, -4.73% was expected to turn down Tesla Inc. TSLA, +2.38% Chief Executive Elon Musk’s offer for the social-networking company, while The Wall Street Journal reported late Monday that private-equity powerhouse Apollo Global Management Inc. APO, +3.22% was considering whether to join in a bid. CNBC later reported that Apollo’s interest was focused on lending money to potential purchasers, not on a private-equity-style buyout. Twitter shares fell 4.7%.
How did other assets fare?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 2.944% rose 5 basis points to 2.911%, the highest since December 13, 2018 based on 3 pm Eastern Time levels, according to Dow Jones Market Data. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, +0.19%, a measure of the currency against a basket of six major rivals, was up 0.2%.
- Bitcoin BTCUSD, +1.43% was trading about 1.6% higher at $41,330.
- In gold futures GC00, -1.72%, gold for June delivery GCM22, -1.72% shed 1.4% to settle at $1,959 an ounce. That’s the lowest finish for the most-active contract price since April 11, according to FactSet data.
- In European equities, the Stoxx Europe 600 SXXP, -0.77% closed 0.8% lower as European traders returned from a four-day Easter weekend, while London’s FTSE 100 UKX, -0.20% lost 0.2%.
- In Asia, the Shanghai Composite SHCOMP, -0.05% posted a loss of less than 0.1%, while the Hang Seng Index HSI, -2.28% fell 2.3% in Hong Kong and Japan’s Nikkei 225 NIK, +0.69% rose 0.7%.
—Steve Goldstein contributed to this report.
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