December 6, 2022

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Stock markets rebound after a week of injury

Stocks rise as corporate earnings beat expectations again

Shares rose for a second day on Tuesday, posting small gains Yet a batch of better-than-expected earnings reports from major companies.

The S&P 500 rose 1.1 percent, adding to a 2.7 percent gain on Monday and pushing the index into positive territory for the month.

Investors are watching companies reporting earnings this quarter to see how they are performing as concerns grow about persistent inflation and a possible recession. Goldman SachsJohnson & Johnson and Lockheed Martin reported quarterly earnings that beat analyst expectations on Tuesday, a day later American bank, Charles Schwab and other leading companies reported surprisingly strong results. This was partly due to lower expectations, given the economic stress: Goldman’s third-quarter earnings fell more than 40 percent from a year earlier.

The KBW Bank index, which tracks major banks, rose about 1.1 percent on Tuesday. The index has risen 2.6 percent since Thursday, just before major banks began reporting earnings. However, the index is down about 23 percent since the start of the year.

Some analysts cautioned against reading the market’s gains, describing them as “bear market rallies” that will eventually give way to further selling. Even after big gains in three of the past four trading sessions, the S&P 500 is down more than 20 percent this year, the bottom line for a bear market.

“When you have bad news day in and day out, and the market crashes day in and day out, people will hold on to whatever good news they receive and magnify it,” said Ed Cofrancesco, CEO of International Asset Advisors.

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A survey of fund managers by Bank of America said the market may be prepared for another market rally if US Treasury yields, a benchmark for borrowing costs, remain below 4 per cent. The yield on the 10-year Treasury fell just below that level on Tuesday and the two-year yield fell to 4.4 per cent. Yields move inversely to prices.

The volatility in the markets came as the Federal Reserve’s efforts to tame inflation have proven difficult, leading to another big hike in interest rates, but all are uncertain when central bank policymakers next meet. in early november. Central bankers were previously expected to discuss slowing rate increases in November, but worse-than-expected inflation data makes it likely that no pivot will occur until later in the year.

Uncertainty about the Fed’s rate path later this year and next, and the economic outlook, means stocks may remain unstable for some time.

“We don’t think the conditions are right for a sustained recovery,” Mark Heffel, chief investment officer at UBS Global Wealth Management, said in an email. “Economic growth is likely to continue to slow at the start of the new year.”

Elsewhere, London’s FTSE 100 index closed 0.2 per cent higher, adding to Monday’s gains after Jeremy Hunt, the new Chancellor of the Exchequer, overturned Prime Minister Liz Truss. tax cut plan. In Europe, the Stoxx 600 Index rose 0.3%, the Hang Seng Index in Hong Kong closed with a gain of 1.8%, and the Nikkei 225 Index in Tokyo rose 1.4%.