US stocks rose sharply on Tuesday in a rally that helped lift all three major indexes more than 5% from June lows.
The benchmark S&P 500 gained 2.8%, while the Dow Jones Industrial Average rose 750 points, or about 2.4%. The tech-heavy Nasdaq Composite rose 3.1%.
[Click here to read what’s moving markets on Wednesday, July 20]
On the earnings side, second-quarter results from companies like Johnson & Johnson ( JNJ ), Truist Financial ( TFC ) and Lockheed Martin ( LMT ) came in Tuesday morning, with Netflix ( NFLX ) in the spotlight after of the closing bell. Shares rose 5.6% ahead of the report, despite expectations that inflation, increased competition and an increase in subscriber turnover will be evident in the results.
[Click here to read what’s moving markets on Wednesday, July 20]
Johnson & Johnson reported earnings for the period that beat analysts’ estimates but cut its full-year sales and profit outlook, pointing to the impact of a stronger U.S. dollar . Stocks were little changed on Tuesday. The healthcare giant’s shares closed up 1.5%.
Meanwhile, shares of IBM ( IBM ) fell 5.3% despite the earnings beat after the software giant cut its free cash flow forecast this year, citing currency headwinds and the loss of business in Russia.
Of the 35 companies in the S&P 500 (comprising 10% of the index) that reported second-quarter results on July 15, 43% of companies beat sales and earnings per share, weaker than the historical average after week 1 of 47% and the weakest share since the first quarter of 2020, according to data from Bank of America Research.
Another 16% of companies are scheduled to report through Friday, including tech giants Tesla ( TSLA ) and Twitter ( TWTR ) later this week, as gains extend ahead of banks in 11 other sectors.
INDIA – 07/07/2022: In this photo illustration, a Tesla logo is shown on a smartphone screen with Elon Musk’s Twitter page in the background. (Photo illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)
“We expect second-quarter EPS to be flat at best, with a flurry of downward revisions,” BofA analysts said in a note on Monday, adding that details on some key issues matter : demand perspective, pricing power, currency markets. , and layoffs.
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In economic news, Commerce Department housing data released on Tuesday showed new U.S. homebuilding activity fell 2% in June to the lowest level since September 2021, already that new construction projects also declined, the latest signs that rising mortgage rates and high home prices are. beginning to weigh on the previously hot housing market.
Federal Reserve officials have indicated they are likely to raise interest rates by 75 basis points at their next policy meeting on July 26-27, after government data last week showed that prices in US consumer spending in June accelerated to the fastest annual pace since November 1981.
The Fed should “communicate to the public that there’s only so much they can do, especially to ease inflation in the short term,” Brian Jacobsen, senior investment strategist at Allspring Global Investments, told Yahoo Finance Live . “If there’s a lesson from history, it’s that if the Fed wants to get inflation under control very quickly, the only way to do it is by taking really extreme moves — it should be kind of a shock and awe number that it would be. economically devastating, so I don’t think they’d like the collateral damage.”
Tuesday’s moves come after a rally in the previous session reversed in the final hour of trading amid a Bloomberg News report that signaled that Apple ( AAPL ) plans to slow hiring and curb spending next year in preparation for a possible economic downturn.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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