Stocks climb on earnings, bonds drop as Fed meets

Bloomberg

A bevy of corporate earnings pulled US stocks higher, while European equities climbed on rising confidence among German businesses. Treasuries retreated with the dollar as the Federal Reserve began its policy meeting.
Earnings from Caterpillar Inc. and McDonald’s Corp. led to outsize gains in the Dow Jones Industrial Average, while Alphabet Inc.’s disappointing results weighed on technology indexes. Banks advanced as sovereign debt yields rose, while a rally in copper aided miners. The euro hit the highest level in almost two years after German business confidence data beat expectations. Saudi Arabia’s promise to further cut crude exports spurred oil toward a second day advancing.
Markets took a risk-on tone Tuesday as generally positive earnings and economic data bolstered confidence in the strength of the global economy. The data come as the Fed will weigh robust global growth against feeble inflation and mixed US economic data. Expectations are for policy makers to keep rates on hold; clues to the fate of its balance sheet will be key.
“Any major policy announcement is more likely when Chair Janet Yellen faces the press following the September meeting,” J&E Davy Holdings Ltd. analyst David McNamara wrote in a note. “For now the Fed remain on track for a couple more rate hikes at least this year, with most members believing the recent softness in inflation to be temporary.”
Meanwhile, Greece returned to the bond market for the first time since 2014. The sub-investment grade rated country raised 3 billion euros ($3.5 billion) after receiving orders of more than 6.5 billion euros, a person familiar with the matter said.
Post-Brexit trade talks between the UK and US are underway in Washington. Fed policy makers with deliver their rate decision on Wednesday. The US Treasury Department will auction $26 billion of notes due in two years. Donald Trump’s son and former Trump campaign Chairman Paul Manafort will go before Senate committees on Wednesday. The US economy probably gained traction in the second quarter as spending by American consumers picked up after a lull early this year. The gross
domestic product report follows the two-day Fed policy meeting. Results from Facebook Inc., Deutsche Bank AG, Nomura Holdings Inc., BNP Paribas SA and
UBS Group AG are among those
expected this week.
The S&P 500 added 0.3 percent at 10:17 a.m. in New York, with McDonald’s and Caterpillar leading gains. Alphabet lost 2.9 percent. The Stoxx Europe 600 Index rose 0.5 percent. The MSCI All-Country World Index rose 0.3 percent. Germany’s DAX Index increased 0.6 percent, the biggest jump in almost two weeks. The MSCI Emerging Market Index fell 0.3 percent, the largest dip in more than two weeks.
The euro rose 0.4 percent to $1.1693, the strongest in more than two years on a closing basis. The Bloomberg Dollar Spot Index fell 0.1 percent.