Stocks Hit Records Ahead of Earnings; Oil Falls: Markets Wrap

(Bloomberg) -- U.S. stocks registered more all-time highs as investors await second-quarter earnings starting this week to gauge whether corporate profits can support equity valuations. Treasury yields edged slightly higher as the U.S. sold debt.

Financials and communication services shares led the S&P 500 to another record, while Tesla, Nvidia and Google parent Alphabet pushed the tech-heavy Nasdaq 100 into uncharted territory. Both indexes set their previous closing marks on Friday. The Stoxx Europe 600 gained for a second day and Asian equity indexes closed in the green.

The U.S. Treasury sold $58 billion of three-year notes at yields slightly higher than before the auction. A sale of $38 billion of 10-year notes was greeted by stronger demand. The dollar gained against most major peers.

“We expect more good news this quarter as more of the economy has opened up, while also acknowledging the second quarter will almost certainly end up being the peak in earnings growth for this cycle,” said LPL Financial strategists Jeff Buchbinder and Ryan Detrick.

Equities and bonds have rallied amid a decline in long-term interest rates and inflation expectations as central banks hold off on unwinding the support driving the recovery from the pandemic. Still, investors remain concerned about the spread of the delta variant and a slowdown in vaccination rates, while pondering when the Federal Reserve will start tapering stimulus.

“The question at the core of the movements in the 10-year Treasury’s yield for most of this year has been whether economic re-openings stateside and around the globe will generate levels of longer lasting inflation for economies, central banks and markets to contend with or will the near-term inflation consumers and businesses are experiencing be transitory as economies transition to a post-Covid environment,” John Stoltzfus, chief investment strategist at Oppenheimer & Co., wrote to clients.

Elsewhere, Asian stocks rose at the start of the week after China’s central bank moved to boost liquidity by cutting the amount of cash most banks must hold in reserve to buttress economic growth.

The euro weakened after European Central Bank President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days. Oil was lower after its first weekly loss in seven amid an OPEC+ dispute over a production increase.

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Here are some events to watch this week:

• Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley are among firms starting the U.S. earnings season
• A closely-watched inflation metric -- the June U.S. consumer price index -- will offer insight into the inflationary pressures Tuesday
• The Reserve Bank of New Zealand’s latest interest rate policy Wednesday
• Bank of Korea monetary decision Thursday
• China second-quarter GDP, key economic indicators Thursday
• Federal Reserve Chair Jerome Powell appears before the Senate Banking Committee to deliver the semi-annual Monetary Policy Report to Congress Thursday
• Bank of Japan interest rate decision Friday

These are some of the main moves in financial markets:

Stocks

• The S&P 500 rose 0.3% as of 4:02 p.m. New York time
• The Nasdaq 100 rose 0.3%
• The Dow Jones Industrial Average rose 0.4%
• The MSCI World index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.1860
• The British pound fell 0.1% to $1.3883
• The Japanese yen fell 0.2% to 110.36 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.36%
• Germany’s 10-year yield was little changed at -0.29%
• Britain’s 10-year yield was little changed at 0.65%

Commodities

• West Texas Intermediate crude fell 0.5% to $74.17 a barrel
• Gold futures fell 0.2% to $1,806.10 an ounce

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