Stocks rebound ahead of Big Tech earnings week

Bloomberg

US stocks rise in a late-day turnaround as dip-buyers emerged ahead of a busy week for Big Tech earnings.
The S&P 500 rallied back in a choppy afternoon session to end near highs of the day, after falling to lows near the 4,200 level. The tech-heavy Nasdaq 100 climbed more than 1%. Twitter Inc extended gains after billionaire entrepreneur Elon Musk agreed to buy the social networking platform. Alphabet Inc., Apple Inc., Amazon.com Inc. and Meta Platforms Inc. are all due to report later this week.
The gains followed stock declines in Europe and Asia as China’s Covid outbreak continued to compound fears sparked by faster Federal Reserve tightening. Fears of wider curbs in Beijing are spooking investors already fretting about the risk of a global slowdown as the Fed raises rates to tame inflation.
“The rebound shows that stocks weren’t ready to test year-to-date lows,” John Lynch, chief investment officer at Comerica Bank, said by email. “Last week’s selloff was an overreaction to Powell’s comments.”
A broad gauge of Chinese stocks dropped to the lowest in almost two years as policy makers put some areas of the capital under lockdown amid the government’s steadfast adherence to its Covid-zero policy. US stocks also tumbled last week after Fed chair Jerome Powell outlined his most bold approach yet to reining in
surging prices and the European Central Bank signalled stronger tightening.
“This week may easily be a fork in the road of equities,” JC O’Hara, chief market technician at MKM Partners, wrote in a note. “We have nearly a third of the S&P 500 and half of the Dow Jones set to report. Bottom-up drivers will either confirm or reject what the challenging macro backdrop has given us over the last three weeks.”
A flight to havens lifted global government bonds, with the yield on the US benchmark note down seven basis points. The dollar extended an advance, while the euro fell even after Emmanuel Macron’s win in the French election removed a key risk for markets. Gold shed nearly 2% and WTI crude oil declined 3% to below $99 per barrel.
Monday’s pullback in the soaring price of commodities since Russia’s invasion of Ukraine has done little to assuage concerns about runaway inflation.
“We continue to believe that US/global equities will not bottom until markets stop discounting ever more aggressive Fed rate policy,” wrote Nicholas Colas, co-founder of DataTrek Research. “It’s not that the current news flow is bad. The problem is that the range of potential economic outcomes is too wide to predict future corporate earnings with any certainty.”