Stocks rebounded after their worst week since April as investors shifted their focus from Joe Biden ending his reelection campaign to the start of the tech earnings season. The megacap space rallied, with the Nasdaq 100 up 1%. Despite concerns about sky-high valuations and seasonal weakness, respondents to Bloomberg’s Markets Live Pulse survey are optimistic about corporate earnings reviving the S&P 500.
The upcoming tech earnings season, with results from Tesla Inc. and Alphabet Inc. on the horizon, has investors feeling positive. Nearly two-thirds of the 463 respondents to the survey expect corporate profits to boost US equities. This optimism has helped the market shrug off uncertainties surrounding Biden’s decision to quit the race and endorse Kamala Harris.
Tom Essaye at The Sevens Report believes that while political developments may cause some market volatility, the ultimate direction of the S&P 500 will still be determined by economic growth. The recent market reaction to Biden’s exit has been relatively muted, with minimal impact on the US dollar and Treasuries.
The S&P 500 rose to 5,535, with the “Magnificent Seven” megacaps leading the charge with a 1.5% gain. Notable performers included Tesla Inc. and Nvidia Corp, while CrowdStrike Holdings Inc. faced a 13% decline due to fallout from a faulty software update. The Russell 2000 of smaller firms also saw a modest increase of 0.5%.
Treasury 10-year yields rose three basis points to 4.27%, and investors are closely watching economic data this week, particularly the Federal Reserve’s preferred inflation gauge. The upcoming US presidential election remains a focus for investors, with differing views on how the outcome could impact markets.
Looking ahead, strategists at BlackRock Investment Institute are confident in US equities, viewing pullbacks as opportunities to invest in stocks. They expect big tech to continue driving returns, buoyed by positive earnings results. However, some caution that the recent outperformance of US small caps may face technical resistance and lack fundamental drivers for sustained growth.
Despite recent market turbulence, JPMorgan Chase & Co. strategists note that profit estimates for the S&P 500 in the second quarter have not been cut as much as usual, leaving little room for disappointment this earnings season. Corporate highlights include reports from Verizon Communications Inc., McDonald’s Corp., Delta Air Lines Inc., Ryanair Holdings Plc, and Berkshire Hathaway Inc.
Key events this week include Eurozone consumer confidence, US existing home sales, earnings reports from Alphabet, Tesla, and LVMH, Canada rate decision, US new home sales, S&P Global PMI, earnings from IBM and Deutsche Bank, Germany IFO business climate, US GDP, initial jobless claims, durable goods data, US personal income, PCE price index, and University of Michigan consumer sentiment.
In the market, stocks rose across major indices, with the S&P 500 up 0.5%, the Nasdaq 100 up 0.8%, and the Dow Jones Industrial Average remaining relatively flat. Currencies and commodities also saw some movement, with bonds and cryptocurrencies experiencing slight fluctuations.
Overall, investors are cautiously optimistic as they navigate through political uncertainties and market volatility. With earnings season in full swing, the focus remains on corporate profits and economic growth as drivers of market direction.
Source: https://finance.yahoo.com/news/dollar-edges-lower-following-biden-225551621.html
Footnotes:
– Bloomberg: https://www.bloomberg.com/
