(Bloomberg) — U.S. equities rose as traders embraced the strength of corporate earnings and evidence of solid consumer demand masked by the surprise contraction in economic growth last quarter.
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The S&P 500 rose 0.7% and the technology-heavy Nasdaq 100 climbed 1%, paced by gains in Meta Platforms Inc. after Facebook added more users than projected. PayPal Holdings Inc. rose on a sales beat, Qualcomm Inc. led U.S. chip stocks higher, and Twitter Inc. missed revenue estimates, reflecting a slowdown in advertising. Amazon.com Inc. and Apple Inc. will report after the bell.
The relief rally punctuates a week of nerves marked by China’s struggle to suppress Covid, Russia’s war in Ukraine and worries that tightening by the Fed may tip the U.S. economy into a recession.
“The earnings season overall has delivered more good news than bad, and could help shift investors focus from the macro headwinds that have battered the major indexes this month,” said Art Hogan, chief market strategist at National Securities. Of the 140 S&P 500 companies that have reported to date, 77% beat their earnings estimates and 65% raised guidance for the full year.
A contraction in gross domestic product data, the first since 2020, could also complicate efforts to combat inflation as a ballooning trade deficit and softer inventory growth is undercutting an otherwise solid consumer and business demand picture.
It’s “not a strong departure point for the real economy that will be facing a far tighter monetary policy backdrop as the Fed proceeds with rate hikes,” BMO’s Ian Lyngen wrote of the first-quarter GDP print. “The Fed has only delivered a single 25 bp hike.”
Treasuries reversed gains, with the yield on the 10-year benchmark climbing to about 2.86%. Oil prices rose to trade over $103 a barrel. And in currency markets, the yen’s plunge to a 20-year low could signal a rewrite of the global currency playbook. The offshore yuan sank, the euro retreated along with the pound, and the ICE dollar index hit a two-decade high.
The Nasdaq’s average daily move over the last 100 trading days reached close to 1.6%, the highest such reading since the early days of the pandemic, according to Bespoke Investment Group. There have only been four other periods that averaged such daily volatility — besides the pandemic, they include the dot-com bust, the 2008 crisis and 2011. “Volatility like we have seen in the last four months doesn’t come around very often,” Bespoke strategists wrote in a note.
In Europe, natural gas prices declined following two days of gains as buyers considered options to keep getting supply from Russia without violating sanctions. European Union members are pushing the bloc to deliver clearer guidance over Russia’s demand for payments in rubles, and Germany has signaled it’s open to a phased-in ban on Russian oil imports.
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Events to watch this week:
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Tech earnings include Amazon, Apple
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EIA oil inventory report, Wednesday
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U.S. 1Q GDP, weekly jobless claims, Thursday
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ECB publishes its economic bulletin, Thursday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.7% as of 11:40 a.m. New York time
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The Nasdaq 100 rose 1.1%
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The Dow Jones Industrial Average rose 0.4%
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The Stoxx Europe 600 rose 0.6%
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The MSCI World index rose 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.7%
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The euro fell 0.4% to $1.0516
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The British pound fell 0.7% to $1.2451
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The Japanese yen fell 1.8% to 130.78 per dollar
Bonds
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The yield on 10-year Treasuries advanced three basis points to 2.86%
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Germany’s 10-year yield advanced nine basis points to 0.90%
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Britain’s 10-year yield advanced six basis points to 1.87%
Commodities
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