U.S. stocks closed firmly higher Tuesday, while the dollar extended its recent decline and Treasury yields held steady, as investors ploughed into another active corporate earnings session amid some mixed messages from some of the world's biggest companies.
A late afternoon report from Bloomberg yesterday suggested that Apple (AAPL), the world's most valuable company, is planning to slow both its hiring and spending in its coming fiscal year. That message was echoed, at least in part, by Goldman Sachs (GS), which signaled ongoing cost-cuts despite its better-than-expected second quarter earnings and solid gains in its global markets division.
Both were enough to pull U.S. stocks lower yesterday, with the Dow swinging nearly 500 points to close 0.69% in the red as investors looked to the impact of softer corporate investment on the broader earnings season.
Bank of America's closely-tracked Fund Managers' Survey, published Tuesday, notes that global money managers are holding the lowest equity allocations since the global financial crisis of 2008, and have the lowest expectation for global growth and corporate profits on record.
"The mood still 'stagflationary' and investors want corporates to shore up balance sheets not increase capex or buybacks," the survey noted.
However, overnight reports that the European Central Bank is discussing a 50 basis point rate hike for its Thursday meeting -- when it's expected to lift its key lending rate for the first time in 11 years -- put downward pressure on the U.S. dollar and gave equity futures a modest pre-market boost ahead of housing starts data at 8:30 am and June quarter earnings from Johnson & Johnson (JNJ), Lockheed Martin (LMT) and Hasbro (HAS).
The dollar index was marked 0.6% lower on the session at 106.721 while benchmark 10-year note yields edged higher to 3.025%. The U.S. Treasury yield curve remains deeply inverted, however, with 2-year notes rising to 3.239%.
U.S. gas prices fell to the lowest levels in nearly two months, taking the national average back below $4.5 per gallon following a fifth consecutive week of declines amid the ongoing pullback in crude prices.
WTI futures contracts for August delivery were marked $1.54 higher in early afternoon trading in New York to change hands at $104.14 per barrel while Brent contracts for September rose $1.13 to $107.43 per barrel.
European stocks edged higher, even as the single currency rebounded from its two-decade lows against the greenback, with the Stoxx 600 closing 1.38% in Frankfurt. Overnight in Asia, the softer dollar helped the Nikkei to a modest 0.65% in Tokyo while the region-wide MSCI ex-Japan index fell 0.28% heading into the close of trading.
On Wall Street, the Dow Jones Industrial Average closed points 754 higher in the opening hour of trading while the broader S&P 500 gained 105 points. The tech-focused Nasdaq added 353 points.
International Business Machines (IBM) shares slumped 6.4% after the tech group posted better-than-expected second quarter earnings but cautioned that the impact of the strongest dollar in more than two decades would erode full-year sales.
Johnson & Johnson echoed that sentiment, posting better-than-expected second quarter earnings but trimming its full year sales and profit forecasts owing to the impact of the stronger greenback.
Lockheed Martin LMT fell 0.5% after it posted weaker-than-expected second quarter earnings, while cutting its full-year profit outlook, thanks in part to supply chain disruptions and slowing F-35 sales.
Twitter (TWTR) shares moved 3.75% lower after the first hearing between its lawyers and those representing Elon Musk in their $44 billion takeover dispute.
Kathaleen McCormick, the chancellor of Delaware's Court of Chancery, will preside over 90 minute meeting -- starting at 11:00 am eastern time via Zoom, owing to her recent Covid positive test -- as the two side line-up arguments for both the timing of the main trial and the basis for which Musk is attempting to abandon his agreement to buy the group for $54.20 per share.
Judge McCormick agreed to Twitter's motion for an expedited trial, which is likely to begin in October.
Netflix (NFLX) shares jumped 4.9% ahead of the streaming service and media group's second quarter earnings after the closing bell.
Netflix is expected to post a bottom line of $2.95 per share for the three months ending in June, with revenues rising 9.5% from last year to $8.04 billion.
