HomeBusinessDow rises 200 points as profits roll in

Dow rises 200 points as profits roll in

The Dow Jones rose about 200 points on Tuesday as markets expected a broader comeback, with bond yields at multi-month highs and tensions rising in the Middle East.

The Dow Jones Industrial Average (^DJI) climbed about 0.6%, following a six-session losing streak. The S&P 500 (^GSPC) was flat, while the tech-heavy Nasdaq Composite (^IXIC) fell about 0.1%.

The more optimistic tone comes as earnings reports started rolling in before the bell. Shares of United Health ( UNH ) rose more than 5% after the healthcare group beat quarterly profit estimates, even as it said it expects to receive $1.6 billion from a February cyberattack.

Investors were also digesting the big banks’ results, with Bank of America ( BAC ) reporting first-quarter profit down 18% year-over-year as a key revenue source weakened, while shares of Morgan Stanley ( MS ) rose because they exceeded expectations. Elsewhere, BNY Mellon (BK) posted a profit margin, while Johnson & Johnson (JNJ) reported a revenue loss. Also on the docket are the results of United Airlines (UAL), among others.

Stocks posted significant losses on Monday as retail sales data fueled expectations that interest rates will stay higher for longer this year. The consensus now is that interest rates should not be cut until September, as the strength of the economy gives the Federal Reserve reason to take its time, although some believe the policy could push policymakers to act sooner.

Bond yields continued to rise after 10-year Treasury yields (^TNX) hit a 2024 high on Monday. Rates rose early Tuesday by about 4 basis points to about 4.66%.

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Escalating tensions in the Middle East are still bubbling in the background as investors wait to see how Israel will decide to respond to this weekend’s Iranian attack, while allies push for military restraint.

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  • Stocks see comeback

    The Dow Jones rose about 200 points on Tuesday as markets expected a broader comeback and broke a six-day losing streak.

    The Dow Jones Industrial Average (^DJI) climbed around 0.6%, while the S&P 500 (^GSPC) was flat. The tech-heavy Nasdaq Composite (^IXIC) fell about 0.1%.

    Bond yields continued to rise after 10-year Treasury yields (^TNX) hit a 2024 high on Monday. Yields rose about 4 basis points and were trading around 4.66% early Tuesday.

  • Chat about interest rates and markets with the CEO of BNY Mellon

    I just had a great post-earnings chat with BNY Mellon (BK) CEO Robin Vince (they reported this morning that they’re stocking up 2% before the market).

    I appreciated his thoughts on rates and markets for me (below. I considered them inflationary!

    “When I think about the movement of interest rates, there are a few things going on in the world. It is clear that we are dealing with geopolitical risks and today with the possible escalation of the current situation [Israel/Iran] conflict – that is certainly a risk. We have persistently relatively high inflation in the US and that clearly entails a risk. This therefore raises questions about the development of interest rates. We have budget problems in the US and continue [high] amount of US government bonds issued from a volume perspective. That may be quite good for our business, but as a citizen and taxpayer you have to be a little concerned about the path of debt sustainability in the United States. So a lot is happening.

    I’ll also give you the downside now, because what we’re seeing is a very strong underlying foundation for the US economy, and that’s not to say that there won’t be a correction in the stock market at some point – it very well could. to happen. That does not mean that there could no longer be a recession at some point. That is inevitable at some point. But if you look at the advantages that the US has now, on a relative basis the country has many important advantages in the world. It is a great destination for investments. You hear that from CEOs internationally. You can see it in investors putting their money in the United States, you can see the stock market performance, and there are a lot of tailwinds hitting the markets right now. So I would say it is a place where you have to be prepared for all eventualities. Could we possibly see the Fed remain on hold? Could we see the Fed cut rates this year? Probably. Could we see the Fed raising rates? Not impossible. You have to be prepared, but at the same time the underlying direction of travel for the US is quite positive.”

  • Bring on those Starbucks revenues

    Starbucks (SBUX) earnings will be released in a few weeks, and note after note I’ve consumed suggests the report could be ugly.

    Most of the concern about Starbucks right now stems from declining store traffic in the US, partly because prices for what Starbucks sells are skyrocketing. I paid $7 for a venti cold brew at a store in New York a week ago (I’ve cut back on trips to Starbucks)!

    Bernstein is out this morning with a fresh look at store traffic, and that’s not pretty.

    Starbucks stock years to date: -11.3%.

    The icy traffic trend at Starbucks.The icy traffic trend at Starbucks.

    The icy traffic trend at Starbucks. (Bernstein)

  • Market quote of the morning….

    Stock futures were all over the map this morning after Monday’s big retail report sparked the threat.

    The indecision on the part of investors comes as they are still clinging to hopes of a rate cut in June, which seems unlikely given the trend of April macro data.

    I think JP Morgan’s strategy team is offering a good, blunt view of the markets this morning, as if trying to align investors:

    “For a market that depends on flawless disinflation, a dovish Fed response and declining tail risks to growth, the continuation of hot growth and inflation numbers could take us to a tipping point where a tighter risk premium on equity bonds ultimately delivers a market correction. Inflation risks are also exacerbated by upside risks to oil due to geopolitical developments regarding Russia and the risk of further escalation in the Middle East. Additionally, investor positioning is high, with cash allocations at historic lows.

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