A Charles Schwab location in New York, USA, on Friday, July 7, 2023.
Michael Nagle | Bloomberg | Getty Images
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profit margin
Major U.S. indexes rallied on Monday as investors grew more optimistic amid strong earnings reports so far. Asia-Pacific markets traded higher on Tuesday as South Korean indices led gains in the region. Meanwhile, New Zealand reported its lowest inflation readings in two years, with consumer prices rising 5.6% year-on-year in the third quarter, less than the 6% rise in the second quarter.
China’s renewed recovery
China’s economic growth will return next year, Mark Makepeace, former boss of benchmark giant FTSE Russell, told CNBC. “In the short term, China may have some problems… but the potential is there,” Makepeace said. One such problem: the country’s real estate sector is still struggling. If Country Garden doesn’t make a $15 million coupon payment today, all of its offshore debt could default.
Big Tech could win in the House of Representatives
If Republican Rep. Jim Jordan is elected speaker of the U.S. House of Representatives, tech giants like Google, Apple and Amazon will benefit, as Jordan opposes using antitrust regulations to break up companies. He directed “most of his anger at the Biden administration’s pressure on companies – not at the companies themselves,” said Adam Kovacevich, CEO of the lobbying group Chamber of Progress.
Biden visits Israel
US President Joe Biden will travel to Israel on Wednesday “to show solidarity in the face of Hamas’ brutal terrorist attack,” he said on the social media platform X. During his stay, Biden will try to prevent an expansion of the war between Israel and Israel to mitigate Hamas and work to ensure the safe passage of critical humanitarian assistance to Gaza, Secretary of State Antony Blinken said.
[PRO] Rising oil prices could boost non-energy stocks
Exogenous shocks such as supply cuts and the war between Israel and Hamas have driven up oil prices. That’s good news for energy stocks – but these non-energy European stocks also stand to benefit if oil and gas prices rise, according to Bank of America.
Even as U.S. Treasury yields rose and the war between Israel and Hamas became increasingly volatile, major indices in the U.S. closed in the green. It appears investor enthusiasm over third-quarter earnings season fueled the stock rally on Monday.
Companies that have already reported mostly beat Wall Street estimates, boosting their stocks. Charles Schwab rose 4.66% after beating earnings expectations, and on Friday, JPMorgan Chase and Wells Fargo rose after their earnings reports.
Investors are hoping that positive start will continue in the week when 53 companies in the S&P 500 – about 11% of its index participants – are due to report results. (In fact, RBC Capital Markets is so bullish on earnings that it raised its forecast for earnings per share in 2023 and 2024. The bank’s new numbers “suggest that the S&P 500 will grow by year-end 2023 could exceed 4,700,” said Lori Calvasina, head of US interest rate strategy at RBC.)
If stocks continue to rise as rapidly as they did on Monday, that’s entirely possible. The S&P 500 gained 1.06% to close at 4,373 and the Nasdaq Composite rose 1.2%. The Dow Jones Industrial Average rose 0.93% on its best day in a month, less than 5% from its 52-week high.
“I really see a recovery rally underway,” said Lisa Erickson, senior vice president at US Bank Wealth Management. “The mood has just become relatively more positive.”
In fact, even the small-cap Russell 2000 index gained 1.59%. “This market is starting to expand a little bit,” Richard Bernstein, CEO of Richard Bernstein Advisors, told CNBC.
The Russell 2000 has underperformed major indexes this year as gains were concentrated in mega-cap stocks in the “Magnificent Seven.” But “if the economy picks up again, which it does, and if earnings growth accelerates again, which it does, then small caps should take the lead,” Bernstein added. “That’s what the story says.”
With the Russell 2000 having its best session since July, it’s no wonder investors are getting more and more excited.