US Stocks Rise With Earnings in Focus; Yields Drop: Markets Wrap

(Bloomberg) -- US stocks gained for a second day, as Goldman Sachs Group Inc. became the latest to provide investors with positive results. Treasury yields dropped.

The S&P 500 rose, heading for its first back-to-back gains in two weeks after the benchmark closed above a key technical support level on Monday. Goldman jumped the most intraday since July following better-than-expected third-quarter results. 

Treasuries gained, sending yields lower across the board. The pound weakened after the Bank of England denied a report it’s delaying the sale of government bonds until markets are calmer.

“Earnings season offers investors the opportunity to focus more on the actual earnings power of corporate America, and less on the machinations of the backward-looking economic data stream,” said Art Hogan, chief market strategist at B. Riley. “A better-than-feared earnings season may well be the catalyst the market needs to see a break in the steady grind lower.”

On the data front, US factory production rose for a third month in September, and capacity utilization increased to 80%, matching the highest since 2000 and a sign that labor and supply constraints have eased. 

Meanwhile, US homebuilder sentiment fell for a 10th straight month in October to the lowest level since the early days of the pandemic, illustrating a housing market battered by higher mortgage rates.

Upbeat company results, cheaper valuations and UK policy reversals have helped buoy risk sentiment. But with headwinds from inflation, risks to the economy and hawkish central banks continuing to confront investors, there’s debate over how durable the gains will prove.

“There’s still a strong feeling of a bear market rally about trading over the course of the last week,” said Craig Erlam, senior market analyst at Oanda Europe Ltd. “The economic landscape looks treacherous and we don’t even know if we’re at peak inflation and interest rate pricing yet. Those are substantial headwinds that will make any stock market rebound extremely challenging.”

Bank of America Corp. said sentiment on stocks and global growth among fund managers it surveyed shows full capitulation, opening the way to an equities rally in 2023. The bank’s monthly global fund manager survey “screams macro capitulation, investor capitulation, start of policy capitulation,” strategists led by Michael Hartnett wrote in a note on Tuesday. They expect stocks to bottom in the first half of next year after the Federal Reserve finally pivots away from raising interest rates.

Tile the pound weakened 0.5% after the BOE said a Financial Times report that the central bank is pushing back the start of its quantitative tightening was “inaccurate.”

The yen paused in its run toward the closely watched 150 per dollar level, which has investors on high alert for possible intervention. Japanese Finance Minister Shunichi Suzuki said he was watching market moves with a sense of urgency.

Elsewhere in markets, oil edged lower as the prospect of additional barrels from strategic reserves assuaged market concerns of a tight market heading into the winter season. Gold also fluctuated and Bitcoin continued to trade below $20,000.

Key events this week:

• Fed’s Neel Kashkari speaks, Tuesday
• Euro area CPI, Wednesday
• EIA crude oil inventory report, Wednesday
• US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
• Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
• US existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Euro area consumer confidence, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.4% as of 10:57 a.m. New York time
• The Nasdaq 100 rose 1.3%
• The Dow Jones Industrial Average rose 1.4%
• The Stoxx Europe 600 rose 0.8%
• The MSCI World index rose 1.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $0.9852
• The British pound fell 0.3% to $1.1324
• The Japanese yen was little changed at 149.07 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $19,425.85
• Ether fell 1.7% to $1,307.86

Bonds

• The yield on 10-year Treasuries declined three basis points to 3.98%
• Germany’s 10-year yield declined four basis points to 2.23%
• Britain’s 10-year yield declined six basis points to 3.92%

Commodities

• West Texas Intermediate crude fell 3.1% to $82.84 a barrel
• Gold futures fell 0.5% to $1,655.70 an ounce

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