Stocks rebounded after the selloff of the past few days, with Corporate America kicking off the busiest week for first-quarter earnings that will be key in shaping the outlook for equities.
About 180 S&P 500 companies — representing more than 40% of the index’s market capitalization — will report results this week. But the biggest expectations are for the “Magnificent Seven” megacaps, whose profits are forecast to rise 38% from a year ago, according to Bloomberg Intelligence. The focus on earnings comes at a time when the rally in equities has been derailed by a jump in bond yields amid signals the Federal Reserve is in no rush to cut rates.
“Earnings are now moving to the forefront,” said Matt Maley at Miller Tabak + Co. “Ignore the data about how many companies beat expectations. Focus on the guidance. Guidance is going to have to be good enough to raise the consensus estimates in a material way for both 2024 and 2025, if the stock market is going to bounce back in significant fashion.”
Equity strategists at Wall Street’s top banks are split on whether companies can deliver on robust earnings forecasts. While Morgan Stanley’s Michael Wilson said he expects profit growth to improve as the economy strengthens, his counterpart at JPMorgan Chase & Co., Mislav Matejka, argues that hot inflation, a stronger dollar and geopolitical tensions are clouding the outlook.
Nearly two-thirds of 409 respondents in Bloomberg’s latest Markets Live Pulse survey said they expect earnings to give the US equity benchmark a boost. That’s the highest vote of confidence for corporate profits since the poll began asking the question in October 2022.
The S&P 500 climbed after a six-day slide. Treasury 10-year yields rose two basis points to 4.64%. The dollar advanced. Oil fell as some of the premium from tensions in the Middle East continued to fade from the market.
Corporate Highlights:
- Verizon Communications Inc. beat analysts’ estimates for profit as it stemmed losses in consumer wireless customers and more people chose premium plans.
- Kroger Co. and Albertsons Cos. agreed to divest more stores to C&S Wholesale Grocers, seeking to make their planned $24.6 billion merger more appealing to antitrust authorities.
- Truist Financial Corp. posted lower first-quarter lending profits than analysts expected as it was forced to pay customers more for deposits with interest rates remaining elevated, and the bank trimmed its revenue guidance for the rest of the year.
- Salesforce Inc.’s takeover talks with Informatica Inc. have cooled with both parties struggling to agree to terms, according to a person familiar with the matter.
- Tesla Inc.’s weekend move to slash prices across its range in China risks triggering a new round in the nation’s bruising price war, with Li Auto Inc. immediately responding with discounts and cash rebates on new models.
- Viking Holdings Ltd. and its existing shareholders are seeking to raise as much as $1.1 billion in a New York initial public offering, with the cruise operator looking to go public as the travel industry rebounds from its pandemic-era slump.
Key events this week:
- Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Tuesday
- US new home sales, Tuesday
- Tesla, PepsiCo earnings, Tuesday
- BOE chief economist Huw Pill speaks, Tuesday
- Germany IFO business climate, Wednesday
- US durable goods, Wednesday
- IBM, Boeing, Meta Platforms earnings, Wednesday
- US GDP, wholesale inventories, initial jobless claims, Thursday
- Microsoft, Alphabet, Airbus earnings, Thursday
- Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
- US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
- Exxon Mobil, Chevron earnings, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4% as of 9:31 a.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $1.0628
- The British pound fell 0.5% to $1.2302
- The Japanese yen was little changed at 154.72 per dollar
Cryptocurrencies
- Bitcoin rose 2.2% to $66,058.85
- Ether rose 1.6% to $3,198.65
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.64%
- Germany’s 10-year yield advanced one basis point to 2.51%
- Britain’s 10-year yield was little changed at 4.22%
Commodities
- West Texas Intermediate crude fell 1.1% to $82.20 a barrel
- Spot gold fell 2.3% to $2,337.90 an ounce
