U.S. equities gained along with stocks in Europe and Asia as upbeat earnings and a surge in corporate dealmaking lifted sentiment, offsetting concerns over China’s regulatory crackdown and the spread of the delta virus variant.
The S&P 500, Dow Jones Industrial Average and Nasdaq 100 all climbed toward record highs on Monday as a gauge of U.S. manufacturing showed growth softening and as the U.S. Senate was also poised to pass a $550 billion infrastructure package this week. Treasuries fell and the dollar was weaker.
Stocks rose after China’s market regulator called on Sunday for more cooperation with the U.S. on initial public offerings, on top of better-than-expected earnings in Europe. Aerospace company Meggitt Plc soared after agreeing to a $8.8 billion takeover by U.S.-based Parker-Hannifin Corp. and digital payments company Square Inc. gained after announcing a $29 billion deal to acquire buy-now, pay-later platform Afterpay Ltd.
Stock market bulls can claim to have history on their side as the corporate earnings season continues to unfold. The S&P 500 rose for a sixth straight month in July — the longest such streak since 2018 — and the average 12-months return after similar runs in the past half century is 8.3%, according to data compiled by Bloomberg. Many risks remain, however, including the impact of the delta virus strain on the world economy, as well as China’s push for more control over some of its major companies.
“Covid and China are clearly risks that need to be watched, but the bottom line is that while the headlines surrounding these issues are potentially negative (and scary), the reality we are hearing from both people and companies implies that neither issue is a direct threat to the rally,” wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. “Corporate commentary and consumer spending remain better than the macro headlines would imply.”
The weaker than expected growth in U.S. manufacturing is adding to expectations for a possibly steadier recovery ahead after a key factory reading from China also slipped. Elsewhere, Minneapolis Fed President Neel Kashkari said the Covid-19 delta strain could keep some Americans from looking for work, potentially harming the U.S. recovery. The latest updates on U.S. jobs are expected later this week.
Crude oil retreated as traders weighed both the global outlook and a rise in tensions between Iran and the U.S. Bitcoin slipped back below $40,000, reversing a weekend rally.
Here are some key events to watch this week:
- Earnings are due this week from Alibaba, BP, Toyota, Uber, Roku, Moderna, KKR
- Reserve Bank of Australia policy decision Tuesday
- Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged Thursday
- Reserve Bank of India monetary policy decision, briefing Friday
- The U.S. jobs report is expected to show another robust month of hiring Friday
Here are the main moves in the markets:
Stocks
- The S&P 500 rose 0.5% as of 10:30 a.m. New York time
- The Nasdaq 100 rose 0.4%
- The Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro was little changed at $1.1878
- The British pound was little changed at $1.3903
- The Japanese yen rose 0.4% to 109.28 per dollar
Bonds
- The yield on 10-year Treasuries declined four basis points to 1.19%
- Germany’s 10-year yield declined two basis points to -0.48%
- Britain’s 10-year yield declined three basis points to 0.53%
Commodities
- West Texas Intermediate crude fell 2% to $72.49 a barrel
- Gold futures were little changed
