Stocks Rebound With Futures as Dip Buyers Swoop In: Markets Wrap
Stocks rose alongside with U.S. equity futures as dip buyers emerged to take advantage of the lowest levels in six weeks, putting their faith in the power of earnings to keep global equities aloft.
The Stoxx 600 Europe Index swung to a gain while S&P 500 and Nasdaq 100 contracts rose as much as 1%, pointing to calmer sentiment. Europe’s energy crisis, China’s struggle to suppress Covid and an aggressive Federal Reserve conspired to drive major bourses in Europe and the U.S. to their lowest since mid-March this week.
Gains in Microsoft Corp. in extended trading on better-than-expected results helped lift sentiment after Tuesday’s tech-fueled slump. U.S. corporate earnings are providing some solace with close to 80% of firms outdoing profit expectations. Among European firms, Mercedes-Benz AG and Michelin reported earnings beats.
“Overall earnings are not that bad and that should come as a support to the market right now,” said Barclays Plc strategist Emmanuel Cau. “It’s essential to focus on earnings to figure out what you want to buy and what you want to sell.”
The euro touched the weakest level versus the greenback since 2017 on Wednesday as Russia said it will stop natural gas flows to Poland and Bulgaria. European gas prices surged as traders weighed the risk of other countries being hit next, spurring worries over a further spike in inflation and a sharp slowdown in the economy.
Oil topped $102 a barrel amid the tension. Fears that the Fed would tip the world’s largest economy into a recession have plagued markets all week, all while activity slows in China as Covid lockdowns bite. Treasuries retreated but the 10-year yield, at about 2.76%, remains lower for the week.
“The backdrop for risk assets continues to be weak, and wasn’t helped by headlines of Russia halting gas supplies to Poland,” wrote Mizuho International Plc strategists including Peter Chatwell. “If we get closer towards the 4200 level on the S&P 500, this may bring some temporary relief for risk, especially with the potential for some earnings positivity today.”
The S&P 500 closed at 4175 Tuesday, the lowest since March 14.
Meanwhile, an Asia-Pacific stock gauge fell to the lowest since mid-2020. But China bucked the trend, carving out an advance after President Xi Jinping vowed more infrastructure projects — the latest step to support a lockdown-hit economy. Covid outbreaks in Shanghai and Beijing also showed some signs of steadying.
