Stocks Halt Five-Day Slide As Earnings Roll In: Markets Wrap

(Bloomberg) -- The stock market rebounded from its longest slide in 2023 amid a raft of corporate earnings, with traders awaiting results from giants Microsoft Corp. and Google's parent Alphabet Inc. after the close. Oil held near $85 a barrel.

The S&P 500 halted a five-day slide, remaining above the 4,200 technical support. Verizon Communications Inc. posted earnings that beat analysts' estimates, while Coca-Cola Co. and General Electric Co. climbed on bullish forecasts. Shares of companies linked to cryptocurrencies reallied as Bitcoin briefly topped $35,000. Treasury 10-year yields were little changed, following Monday's intense volatility.

Investors looking to the earnings season for a dose of good news are hanging their hopes on big tech. The five biggest companies in the S&P 500 — Apple Inc., Microsoft, Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark's market capitalization. Their earnings are projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.

“Big tech earnings are very important for the broader market, as these stocks have carried the entire stock market so far this year. As these big tech stocks go, so does the overall market,” said David Trainer, chief executive officer of investment research firm New Constructs. “Strong big tech earnings may just be what's needed to end the stock market correction that started in late July. If big tech companies blow their numbers out of the water and provide strong guidance for future earnings, then we could see the stock market rally strongly through the end of the year.”

The pain in long-duration growth stocks, fueled in recent weeks by a relentless surge in Treasury yields, is finally on the verge of subsiding. That is, at least, if the so-called Taylor Rule is anything to go by. 

The equation, posited by Stanford economist John Taylor in 1993, has become a way to measure how the Federal Reserve can use its overnight bank lending rate to tame inflation or stimulate the US economy. Now, it's approaching a critical inflection point for the US equity market by signaling that the central bank has finally normalized rates.

Elsewhere, Chinese President Xi Jinping stepped up support for the world's second-biggest economy, issuing additional sovereign debt, raising the budget deficit ratio and even making an unprecedented visit to the central bank. Bank of Japan officials are likely to monitor bond yield movements until the last minute before making a decision on whether to adjust the yield curve control program at a policy meeting next week, according to people familiar with the matter.

European Central Bank chief Christine Lagarde reckons the fight against inflation is going well but the lack of a regional deal on fiscal rules is turning into a headache, according to people familiar with the matter. 

Corporate Highlights

• Kimberly-Clark Corp., the maker of Scott bath tissue, raised its earnings outlook for the year as shoppers proved willing to keep paying more for essential goods.
• RTX Corp.'s profit topped Wall Street expectations and the company announced a $10 billion share-buyback program as it works to contain fallout from a costly quality lapse in its marquee engine for commercial aircraft.
• General Motors Co. can no longer say if it will make up to $14 billion in profit this year because a United Auto Workers strike, now in its sixth week, has made the company's financial future too difficult to predict.
• Barclays Plc is planning to cut costs after the banking giant's trading division missed estimates in the third quarter and the firm lowered guidance for its UK lender again.

Key events this week:

• Australia CPI, Wednesday
• Germany IFO business climate, Wednesday
• Canada rate decision, Wednesday
• US new home sales, Wednesday
• IBM, Meta earnings, Wednesday
• European Central Bank interest rate decision; President Christine Lagarde holds news conference, Thursday
• US wholesale inventories, GDP, US durable goods, initial jobless claims, pending home sales, Thursday
• Intel, Amazon earnings, Thursday
• China industrial profits, Friday
• Japan Tokyo CPI, Friday
• US PCE deflator, personal spending and income, University of Michigan consumer sentiment, Friday
• Exxon Mobil earnings, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 9:30 a.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average rose 0.5%
• The Stoxx Europe 600 was little changed
• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.5% to $1.0619
• The British pound fell 0.4% to $1.2197
• The Japanese yen was little changed at 149.83 per dollar

Cryptocurrencies

• Bitcoin rose 9.3% to $34,458.57
• Ether rose 7% to $1,828.18

Bonds

• The yield on 10-year Treasuries was little changed at 4.86%
• Germany's 10-year yield declined five basis points to 2.83%
• Britain's 10-year yield declined five basis points to 4.55%

Commodities

• West Texas Intermediate crude fell 0.9% to $84.74 a barrel
• Gold futures fell 0.7% to $1,973.60 an ounce

This story was produced with the assistance of Bloomberg Automation.

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