Wall Street climbs to kick off a big week for earnings reports

People walk past the New York Stock Exchange Wednesday, April 3, 2024 in New York. Healthcare business Solventum started trading at the NYSE on Wednesday. (AP Photo/Peter Morgan)

NEW YORK — U.S. stocks climbed Monday and clawed back a chunk of their losses from last week, which was the worst for the S&P 500 in more than a year.

The S&P 500 rose 0.9 percent to recover more than a quarter of last week’s rout. The Dow Jones Industrial Average added 253 points or 0.7 percent, and the Nasdaq composite jumped 1.1 percent.

The rally was widespread, and most stocks across Wall Street rose. In the S&P 500, technology stocks led the way to bounce back from their worst week since the COVID-19 crash of 2020.

Nvidia leaped 4.4 percent while Alphabet climbed 1.4 percent as Treasury yields stabilized in the bond market. Last week, a jump in yields cranked up the pressure on stocks, particularly those seen as the most expensive and making their investors wait the longest for big growth.

Bank stocks were also strong following some encouraging profit reports. Truist Financial rallied 3.4 percent after its profit for the start of the year topped analysts’ expectations.

They helped offset a 3.4 percent drop for Tesla, which announced more cuts to prices over the weekend. Elon Musk’s electric vehicle company has seen its stock drop more than 40 percent so far this year, and it will report its first-quarter results on Tuesday.

READ: Tesla cuts the price of its ‘Full Self Driving’ system by a third

It’s a big week for earnings reports, with roughly 30 percent of the companies in the S&P 500 scheduled to say how much they made during the year’s first three months. That includes companies that have come to be known as part of the “Magnificent Seven,” beyond Tesla and Alphabet. This handful of companies was responsible for the majority of the S&P 500’s big gain last year, raising the bar of expectations for them to justify their stock prices.

Corporate earnings reports

Analysts believe those seven stocks saw growth in their earnings per share slow to 39 percent as a group from 63 percent at the end of last year, according to strategists at Bank of America. This past quarter may also have marked the trough for earnings declines among the other 493 companies in the index.

READ: Can sizzling Magnificent Seven trade keep powering US stocks in 2024?

The difference in growth between the Magnificent Seven and the rest of the S&P 500 should close by the end of the year, strategists Ohsung Kwon and Savita Subramanian said in a BofA Global Research Report.

Verizon Communications helped kick off this week’s reports by disclosing a drop in profit that wasn’t as bad as analysts expected. It cited price increases and other measures to support its revenue. Verizon’s stock swung from an early gain to a loss of 4.7 percent after it reported weaker revenue for the first quarter than expected and kept its forecast for full-year profit the same.

All told, the S&P 500 rose 43.37 points to 5,010.60. The Dow gained 253.58 to 38,239.98, and the Nasdaq jumped 169.30 to 15,451.31.

Even more pressure than usual is on companies broadly to deliver fatter profits and revenue. That’s because the other big factor that sets stock prices, interest rates, looks unlikely to offer much help in the near term.

Top officials at the Federal Reserve warned last week that they may need to keep interest rates high for a while to ensure inflation is heading down to their 2 percent target. That was a big letdown for financial markets, dousing hopes that had built after the Fed signaled earlier that three interest-rate cuts may come this year.

READ: Powell sticks with Fed’s cautious rate-cut strategy

Lower rates had appeared to be on the horizon after inflation cooled sharply last year. But a string of reports this year showing inflation has remained hotter than expected has raised worries about stalled progress.

Staying cautious

Worries about “sticky” inflation are one of the reasons strategists at Stifel are encouraging investors to stay cautious.

Stocks generally look more expensive, in part because of a frenzy on Wall Street around anything related to artificial intelligence technology.

Some analysts are suggesting stock prices could keep steaming ahead as the mania around AI builds even higher, but Stifel’s Barry Bannister and Thomas Carroll point to signs that “the speculative fever would break” for tech, including a possible top for the price of bitcoin. They suggest caution well into the year’s third quarter, which stretches from July through September.

Bitcoin remains below its peak set a month ago, but it rose on Monday.

In the bond market, the yield on the 10-year Treasury eased to 4.61 percent from 4.63 percent late Friday. The two-year Treasury yield, which moves more closely with expectations for the Fed, slipped to 4.97 percent from 4.99 percent.

In markets abroad, stocks rose 1.8 percent in Hong Kong but fell 0.7 percent in Shanghai after the People’s Bank of China kept its 1-year and 5-year loan prime rates unchanged.

The Chinese central bank is waiting to see if more stimulus is needed after the world’s second-largest economy expanded at a faster-than-expected rate in the first three months of the year, according to analysts.

Stock indexes were higher across much of the rest of Asia and Europe.