Stocks and US Futures Rise With Earnings in Focus: Markets Wrap

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

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The Stoxx Europe 600 index climbed 0.6%, with the technology sector leading the advance. SAP SE jumped almost 5% as a boom in demand for artificial intelligence fueled the German software company’s growth. Drugmaker Novartis AG added as much as 5% after lifting full-year guidance. US stock futures edged higher after Monday’s rebound on Wall Street.

Earnings are front and center of investor’s minds this week with about 180 companies — representing over 40% of the S&P 500 market value — reporting results. The focus on corporate profits comes after a rout fueled by geopolitical fears and signals the Federal Reserve will be in no rush to lower rates.

“We remain focused on the current earnings season, which could re-focus investor attention on solid underlying fundamentals,” Citigroup Inc. strategists Mihir Tirodkar and Beata Manthey wrote in a note. “We would view the recent pullback as a buying opportunity.”

PMI data on Tuesday reinforced bets the European Central Bank is on course to start easing policy soon. Private-sector activity advanced to the highest level in almost a year, driven by a buoyant services sector and Germany’s return to growth. Barring any economic surprises, a rate cut in June is a “fait accompli,” ECB Vice President Luis de Guindos said. The euro gained against the dollar.

Treasuries were steady before a flurry of bond auctions that will test investors’ appetite after yields hit the highest in 2024. A guage of the greenback was little changed.

The UK 10-year yield ticked higher after the government raised the amount of bonds it plans to sell this fiscal year by more than analysts expected, adding to what was already the second-largest gilt package on record.

Gold extended losses after its biggest daily decline in almost two years, with easing tension in the Middle East and signs the Fed will keep rates higher for longer crimping demand. Oil nudged higher as traders weighed the next steps between Israel and Iran amid signs of easing hostilities following a tit-for-tat exchange of attacks last week.

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Elevated Multiples

The challenge to S&P 500 returns this earnings season is that companies will have to produce earnings — and outlooks — that support the already elevated multiples. Indeed, stakes are high for the “Magnificent Seven” megacaps, whose profits are forecast to rise 38% in the first quarter from a year ago, dwarfing the overall S&P 500’s 2.4% anticipated year-over-year earnings growth, according to Bloomberg Intelligence.

But excluding Nvidia, the leading chipmaker for AI technology, expected net income growth for the group falls to 23%. Nvidia, which Goldman Sachs Group Inc.’s trading desk dubbed “the most important stock on planet Earth,” doesn’t report its earnings for another month.

Investor positioning on megacap growth and tech stocks continues to be cut, down from the 97th percentile in early March to the 77th percentile now, according to Deutsche Bank AG strategists. The group is still the only sector where positioning is above historical average, even if no longer extreme, the strategists wrote.

Key events this week:

• 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 Stoxx Europe 600 rose 0.6% as of 9:19 a.m. London time

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.3%

• Futures on the Dow Jones Industrial Average rose 0.2%

• The MSCI Asia Pacific Index rose 0.6%

• The MSCI Emerging Markets Index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.3% to $1.0683

• The Japanese yen was little changed at 154.83 per dollar

• The offshore yuan was little changed at 7.2569 per dollar

• The British pound rose 0.1% to $1.2364

Cryptocurrencies

• Bitcoin fell 0.7% to $66,095.77

• Ether fell 0.9% to $3,161.93

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.62%

• Germany’s 10-year yield was little changed at 2.49%

• Britain’s 10-year yield advanced one basis point to 4.22%

Commodities

• Brent crude rose 1% to $87.83 a barrel

• Spot gold fell 0.8% to $2,309.08 an ounce

This story was produced with the assistance of Bloomberg Automation.

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

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