US stocks lifted by earnings, commodities; bonds gain

Bloomberg

US stocks extended all-time highs as corporate earnings bolstered optimism about the strength of the global economy, lifting commodities. Bonds bounced as investors waited for clues on the fate of the Federal Reserve balance sheet.
The S&P 500 Index advanced as results lifted stocks from AT&T Inc. to Boeing Co. Asian and European benchmark equity indexes rose, while crude climbed above $48 a barrel for the first time since early June. Copper reached a two-year high on expectations of increasing demand from China, while gold fell. Treasuries and European government bonds rose following Tuesday’s selloff.
More than 80 percent of S&P 500 companies have delivered earnings that have beaten forecasts so far this reporting period, helping to support optimism in the global economy and pushing volatility to record lows. Investors are looking for guidance from the Fed on how it plans to unwind its bond portfolio, with policy makers seen keeping interest rates on hold as the US central bank meeting concluded on Wednesday.
“Top of our mind is whether there will be more clarity on efforts to unwind the US$4.5 trillion portfolio of Treasuries and mortgage-backed securities,” Isaah Mhlanga, an economist at Rand Merchant Bank in Johannesburg, said in a client note. “We think the bank will give more clarity on its intention to do so but without the specifics of timing. When the Fed eventually introduces Taper 2.0, that will be the return of volatility.”
Investors see no chance of a rate increase in July, according to pricing in federal funds futures contracts. Policy makers might update their language on inflation, because weakness in price data has persisted since they met in June.
The Fed will unveil the timing of its balance sheet unwind in September and wait until December to raise interest rates again, according to a Bloomberg survey of 41 economists. More on that here. Donald Trump’s son and former Trump campaign Chairman Paul Manafort will go before Senate committees on Wednesday. Data on new home sales may give clues about the state of the US economy after growth in new mortgage applications slowed in July. 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 gained 0.1 percent to 2,480.40 as of 9:31 a.m. in New York, after closing at a record on Tuesday. The Dow Jones Industrial Average rose above 21,700 for the first time. The Stoxx Europe 600 Index advanced 0.5 percent, the biggest gain in a week. The UK’s FTSE 100 Index increased 0.4 percent. Germany’s DAX Index climbed 0.2 percent.
Gold dipped 0.3 percent to $1,246.28 an ounce. West Texas Intermediate crude advanced 1 percent to $48.37 a barrel, the highest in seven weeks. Crude inventories declined by 10.2 million barrels last week in an American Petroleum Institute report released Tuesday, people familiar with the data said. Copper gained 0.2 percent. Read more about copper’s rally here.