Stocks soar as investors analyze another round of earnings

U.S. stocks rose sharply on Tuesday in a rally that helped lift the three major indexes more than 5% from their June lows.

The benchmark S&P 500 index gained 2.8%, while the Dow Jones Industrial Average jumped 750 points, or about 2.4%. The tech-heavy Nasdaq Composite jumped 3.1%

On the earnings front, second quarter results from companies such as Johnson & Johnson (JNJ), Truist Financial (TFC) and Lockheed Martin (LMT) arrived Tuesday morning, with Netflix (NFLX) in the spotlight after the bell of fencing. Shares rose 5.6% ahead of the report despite expectations that inflation, increased competition and an uptick in subscriber churn will show up in earnings.

Johnson & Johnson reported earnings for the period that beat analysts’ estimates but cut its full-year sales and profit outlook, underscoring the impact of a stronger U.S. dollar. Shares were little changed on Tuesday. Shares of the healthcare giant closed down 1.5%.

Meanwhile, IBM (IBM) stock fell 5.3% despite falling profits after the software giant cut its free cash flow forecast this year, citing currency headwinds and a loss of business in Russia.

Of the 35 companies in the S&P 500 (comprising 10% of the index) that reported second-quarter results through July 15, 43% of companies beat sales and earnings per share, which is weaker than average post-week 1 historical of 47% and the lowest share since the first quarter of 2020, according to data from Bank of America Research.

16% of companies are expected to report through Friday, including tech giants Tesla (TSLA) and Twitter (TWTR) later this week, as earnings spread beyond banks to 11 other sectors.

INDIA - 2022/07/07: In this photo illustration a Tesla logo is displayed on a smartphone screen with Elon Musk's Twitter page in the background.  (Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)

INDIA – 2022/07/07: In this photo illustration a Tesla logo is displayed 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 ‘come true’ at best, with a wave of downward revisions,” BofA analysts said in a note on Monday, adding that details on a few key topics are of concern. Importance: demand outlook, pricing power, foreign exchange markets. , and layoffs.

In economic releases, Commerce Department housing data released on Tuesday showed new U.S. homebuilding activity fell 2% in June to the lowest level since September 2021, new Construction projects have also fallen, with the latest signs that rising mortgage rates and high house prices are starting to weigh on the once hot housing market.

Federal Reserve officials signaled they would likely raise interest rates by 75 basis points at their next policymaking meeting on July 26-27 after government data last week showed that U.S. consumer prices in June had accelerated at the fastest annual rate since November 1981.

The Fed should “communicate to the public that there’s not much it can do, particularly to ease near-term inflation,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. , at 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 that is to take really extreme measures – it would have to be some kind of shock and awe that would be economically devastating, so I don’t think they would like the collateral damage.

Tuesday’s moves come after a rally from the previous session was reversed in the past hour of trading amid a report from Bloomberg News that indicated that Apple (AAPL) planned to slow hiring and cut spending next year in anticipation of a potential economic downturn.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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