US stocks rise as Dow extends rebound

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US stocks rose on Wednesday, extending the rebound from the previous session as investors focused on the start of the corporate earnings season.

The S&P 500 climbed 0.7%, a day after the broad gauge of the market posted its biggest one-day gain since late March. The advance nearly canceled out the S&P 500’s steep decline from Monday and pushed the index to less than 1.5% of its closing high. The Dow Jones Industrial Average rose 265 points, or 0.8%, and the Nasdaq Composite added 0.6%.

The earnings season helped boost sentiment. As of Tuesday, 85% of S&P 500 companies that have filed quarterly results have beaten analysts’ expectations, according to FactSet.

The market has recently shifted from fear to fear, said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. The earnings season has given traders something positive to focus on, he said. “It’s nice to see some stabilization. “

The renewed appetite for risk boosted small-cap stocks, which had fallen further than their large-cap counterparts of late. The Russell 2000 was up 1.3% on Wednesday morning, although it is still down around 2.8% this month.

Many fund managers say they see little other place than stocks to deploy liquidity with yields on government and corporate bonds trading at depressed levels. Some remain concerned, however, that the Delta variant will slow the global economic rebound, and they expect a choppy negotiating period ahead of the peak summer vacation period.

“The outlook in an absolute sense is still quite good: this is a rebound from a great recession,” said Jonas Goltermann, senior markets economist at Capital Economics. “It’s hard to justify big falls.

Nevertheless, Mr. Goltermann added that “last month [has] the navigation has not been smooth and it may take a while to get back to something calmer. He expects government bond yields to rebound to their March highs and investors to reallocate money to stocks that benefit from the reopening of the economy, albeit with less eagerness than ‘at the beginning of the year.

Chipotle Mexican Grill climbed 10% after reporting sales that exceeded pre-pandemic levels. Coca-Cola added 1.9% after saying this year’s profits would outweigh the beverage giant’s previous forecast.

Johnson & johnson‘s

second-quarter revenue rose 27%, and shares of the medical company added 0.3%. Harley-Davidson fell 7.2% even after the motorcycle maker made a profit in the second quarter.

Texas instruments,

Whirlpool and Equifax are expected to release their results after markets close.

The yield on 10-year Treasuries rose to 1.288% from 1.208% on Tuesday. Yields are moving in the opposite direction to bond prices and have slipped in recent weeks, indicating less concerns about a prolonged breakout in inflation.

“Consumers are going to remain at least moderately cautious as Delta spreads everywhere,” said Christopher Jeffery, head of inflation and rate strategy at Legal & General Investment Management. “It’s really hard to think that the UK model won’t at least partially be followed in the US and Europe,” he added, referring to a spike in cases in the UK.

Still, Jeffery is bullish on the outlook for equities. “It is difficult for us to be structurally negative on stocks” given the good start to the results season, he said.

In overseas markets, the Stoxx Europe 600 jumped 1.7%, driven by shares of travel, leisure and retail companies. Japan’s Nikkei 225 rose 0.6% and the Shanghai Composite Index rose 0.7%.

Markets are expected to remain nervous before the peak summer vacation period.


Photo:

Richard Drew / Associated press

Write to Joe Wallace at [email protected]

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