Stocks Gain Before Earnings; Oil Drops From High: Markets Wrap

(Bloomberg) -- U.S. stocks rose to another record high as traders geared for a string of earnings reports from technology heavyweights including Facebook Inc., while keeping in mind inflation concerns and rising Covid-19 risks.

Consumer discretionary, energy and materials sectors led the S&P 500 to an all-time high. PayPal Holdings Inc. rose after the company said it isn’t pursuing an acquisition of Pinterest Inc., ending days of speculation over a potential $45 billion deal. Tesla Inc. advanced after receiving an order for 100,000 cars from Hertz Global Holdings Inc. Still to come: the five largest U.S. technology companies are set to report earnings, starting with Facebook on Monday.

“This year, broad market indices have benefited from robust earnings growth—the rising tide lifts all boats adage has been in full effect,” said Principal Global Investors Chief Strategist Seema Shah. “But as the economy slows and market conditions become more challenging, selectivity will be key. Staying overweight equities, with a focus on factors such as quality, will be increasingly important for investors aiming to balance portfolios in the market environment ahead.”

Oil pared gains after hitting $85 a barrel for the first time since 2014 with traders focused on upcoming talks between Iran and the European Union that may lead to a revival of a 2015 nuclear deal.  

Yields on shorter-maturity Treasuries fell and the dollar edged higher after Federal Reserve Chair Jerome Powell flagged that inflation could stay higher for longer, fueling investor concern that sticky price increases may force policy makers to raise borrowing costs. Gold advanced above $1,800 an ounce. 

Global equities have remained resilient despite risks from price pressures stoked by supply-chain bottlenecks and higher energy costs. Treasury Secretary Janet Yellen is among those counseling the inflation situation reflects temporary pain that will ease in the second half of 2022. Investors are wary that tighter monetary policy to keep inflation in check will stir volatility.       

Traders are also monitoring an outbreak of the delta virus strain in China that is expected to worsen. The nation sought to allay concerns about the economy’s slowdown with a lengthy state media commentary outlining how the government is managing risks and remains confident about achieving its targets for the year.

The Stoxx Europe 600 index edged higher. The basic-resources sector advanced as crude oil and metals rose earlier, while banks increased on HSBC Holdings Plc’s bright outlook.    

Here are some events to watch this week:

• Earnings: Amazon, Apple, Facebook, Microsoft, Twitter, Samsung Electronics, China Vanke, PetroChina, Ping An Insurance Group
• Australia CPI, Wednesday
• U.S. wholesale inventories, U.S. durable goods, Wednesday
• Bank of Japan monetary policy decision, briefing, Thursday
• ECB rates decision, President Christine Lagarde briefing, Thursday
• U.S. GDP, initial jobless claims, Thursday
• G-20 joint finance and health ministers meeting ahead of the weekend leaders’ summit, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 4 p.m. New York time
• The Nasdaq 100 rose 1%
• The Dow Jones Industrial Average rose 0.2%
• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.3% to $1.1611
• The British pound was little changed at $1.3765
• The Japanese yen fell 0.2% to 113.72 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.63%
• Germany’s 10-year yield declined one basis point to -0.11%
• Britain’s 10-year yield was little changed at 1.14%

Commodities

• West Texas Intermediate crude fell 0.4% to $83.45 a barrel
• Gold futures rose 0.7% to $1,808.10 an ounce

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