US Stocks, Futures Rise with Earnings Eyed: Markets Wrap

(Bloomberg) — European stocks rose for a second day after strong earnings for some of the region's largest companies, while positive economic data helped boost sentiment.

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The Stoxx Europe 600 rose 0.6%, with the technology sector leading the advance. SAP SE jumped nearly 5%, as booming demand for artificial intelligence fueled the German software company's growth. Drugmaker Novartis AG added as much as 5% after raising its full-year guidance. US stock futures rose after Wall Street rebounded on Monday.

Earnings are at the forefront of investors' minds this week, as about 180 companies – representing more than 40% of the S&P 500's market capitalization – reported results. The focus on corporate earnings comes after a decline fueled by geopolitical concerns and signs that the Federal Reserve will not be in a rush to cut interest rates.

“We remain focused on the current earnings season, which could refocus investor attention on strong fundamentals,” Mihir Tirudkar and Beata Manthey, strategists at Citigroup, wrote in a note. “We will view the recent pullback as a buying opportunity.”

Tuesday's PMI data reinforced bets that the European Central Bank is on track to start easing monetary policy soon. Private sector activity rose to its highest level in almost a year, driven by a booming services sector and Germany's return to growth. European Central Bank Vice President Louis de Guindos said that barring any economic surprises, a June interest rate cut is a “fait accompli.” The euro rose against the dollar.

Treasuries stabilized ahead of a wave of bond auctions that will test investors' appetite after yields hit their highest levels in 2024. The measure of the US currency was little changed.

The yield on Britain's 10-year bond rose after the government raised the amount of bonds it plans to sell this financial year by more than analysts had expected, adding to what was already the second-largest government bond package on record.

Gold extended losses after its biggest daily decline in nearly two years, with easing tension in the Middle East and signs that the Federal Reserve will keep interest rates high for longer, pressuring demand. Oil rose as traders weighed the next steps between Israel and Iran amid signs of an easing of hostilities following last week's exchange of attacks.

High complications

The challenge for S&P 500 returns this earnings season is that companies will have to produce earnings — and forecasts — that support already high multiples. In fact, there are significant risks for the “Greater 7” giants, whose profits are expected to rise 38% in the first quarter from a year ago, dwarfing the S&P 500's overall earnings growth of 2.4% year over year, according to Bloomberg. Intelligence. .

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But excluding Nvidia, the leading chipmaker for artificial intelligence technology, the group's net income growth is expected to fall to 23%. Nvidia, which was named by Goldman Sachs Group Inc.'s trading desk. Titled “the hottest stock on the planet,” it doesn't report earnings for another month.

Investors' positions in large-cap growth and technology stocks continue to decline, falling from the 97th percentile in early March to the 77th percentile now, according to strategists at Deutsche Bank. The group remains the only sector where positioning is above the historical average, even if it is no longer an outlier, the strategists wrote.

Main events this week:

• New home sales in the United States, Tuesday

• Tesla and PepsiCo earnings on Tuesday

• Bank of England chief economist Huw Bell speaks on Tuesday

• Germany Ifo Business Climate, Wednesday

• US Durable Goods, Wednesday

• IBM, Boeing and Meta Platforms earnings on Wednesday

• US GDP, wholesale inventories, initial jobless claims, Thursday

• Microsoft, Alphabet and Airbus earnings on Thursday

• Japan interest rate decision, Tokyo CPI, inflation expectations and GDP, Friday

• US Personal Income and Spending, Personal Consumption Expenditures Deflator, University of Michigan Consumer Confidence, Friday

• Exxon Mobil and Chevron earnings on Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was up 0.6% as of 9:19 a.m. London time

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.3%

• Dow Jones Industrial Average futures rose 0.2%

• MSCI Asia Pacific Stock Index rises 0.6%

• MSCI Emerging Markets Index rises 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%.

• The euro rose 0.3 percent to $1.0683

• There was little change in the Japanese yen at 154.83 to the dollar

• There was little change in the yuan in external transactions at 7.2569 to the dollar

• The British pound rose 0.1 percent to $1.2364

Digital currencies

• Bitcoin fell 0.7% to $66,095.77

• Ethereum fell 0.9% to $3,161.93

Bonds

• The yield on the 10-year Treasury note rose one basis point to 4.62%.

• The yield on 10-year German bonds was little changed at 2.49%.

• The yield on British 10-year bonds rose one basis point to 4.22%.

Goods

• Brent crude rose 1 percent to $87.83 a barrel

• Gold in spot transactions fell 0.8 percent to $2,309.08 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Jessica Minton, Winnie Hsu, and Michael Msika.

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