Global stocks continued to rise, with the exception of Asian stocks, as investors turned their attention to corporate financial results after weeks of volatility stemming from concerns about technology company valuations and the war in the Middle East.
S&P 500 futures rose 0.2% after a tech-led rally on Wall Street on Monday pushed the index close to a record high. Nasdaq 100 futures climbed 0.6%. Palantir Technologies Inc. shares jumped 14% in extended trading after the company raised its revenue and earnings forecasts. SpaceX and Advanced Micro Devices (AMD) are scheduled to report their earnings today.
The pan-European STOXX 600 index rose 0.6%, heading for a close at a key level. Bayer shares jumped more than 4% after the company's profits beat expectations. Conversely, Zalando shares fell 13% after the company lowered its full-year outlook, and Deutsche Lufthansa shares declined following a warning about uncertainty stemming from volatile jet fuel prices.
Stocks in Asia were an exception to the rally, with the MSCI Asia Pacific index falling 0.2%.
US Treasury bond prices were steady, with the 10-year yield remaining virtually unchanged at 4.68%, while oil prices rebounded after falling in the previous session when optimism about easing geopolitical tensions in the Middle East pushed crude prices lower. Brent crude rose 1.2% to near $85 a barrel, following a 4.7% gain on Monday.
The US dollar was steady, spot gold rose 0.2% to $4,064 an ounce, while Bitcoin fell 0.3% to $63,556.
The yen fell 0.3% to 157.70 against the dollar, giving up some of its recent gains made as a result of intervention by the US and Japanese governments.
Technology stocks rebound after sharp swings in July
The rise in US technology stocks came after a volatile month as investors doubted whether billions of dollars spent on artificial intelligence would translate into stronger growth and profits. However, a positive earnings season so far has eased some of these concerns, with 86% of S&P-listed companies exceeding expectations, the highest percentage in five years, and an annualized growth rate for earnings per share of 29%, according to Bloomberg Intelligence.
Jeff Bookbinder, chief equity strategist at LPL Financial, told Bloomberg: “A combination of robust economic growth, strong corporate results and AI-driven investments continues to provide supportive conditions for equities.”
He added: While investors are scrutinizing the increased capital spending by major cloud computing companies and monitoring developments in the Middle East, we expect strong results to create a supportive environment that will offset the impact of these risks.
SpaceX results and jobs data test the markets
SpaceX’s first financial results as a publicly traded company, due later on Tuesday, could represent another major test for the stock markets.
The results will also pave the way for one of the largest unfreezings of shares in the history of capital markets, with shares worth up to $116 billion becoming eligible for sale for the first time next month. The company's stock is currently down more than 15% from its closing price on June 11.
Chris Weston, director of research at Pepperstone Group, told Bloomberg: “Perhaps the biggest issue facing SpaceX remains the anticipated heavy selling pressure due to the expected oversupply of shares.” He added: “There’s a sense that many investors are still interested in buying the company’s stock, but they’re waiting for the selling pressure associated with the expiration of the lock-up period to subside.”
Geopolitical developments and US jobs data due later this week remain in focus, as investors assess whether the recent drop in oil prices will ease inflationary pressures and affect the outlook for interest rates.
Billy Leong, investment strategist at Global X Management, told Bloomberg: “Investors are essentially waiting for data to provide a clearer picture of the direction of interest rates, rather than trading based on statements. The US jobs data on Friday is the next real test.”
However, Chris Larkin of Morgan Stanley’s E*Trade told Bloomberg that the volatile nature of diplomacy between the United States and Iran, which sometimes advances and sometimes retreats, could mean that earnings and jobs data will be crucial to supporting stocks this week.
Ahead of a batch of jobs data, figures showed that U.S. manufacturing activity expanded in July at its fastest pace in more than four years, with demand remaining strong, production rising, and companies adding more workers.
Scott Rubner of Citadel Securities told Bloomberg that the forces that drove U.S. stocks to record highs this year remain firmly in place, following a reset in speculative trading among retail investors.
He wrote: Markets are moving from an environment driven by flows to one increasingly determined by earnings, corporate demand, and the macroeconomic background.
