Market Snapshot: U.S. stocks extend rally as investors await Tesla earnings

What’s driving markets

Investors are hoping that a survey showing fund managers at their most bearish since the great financial crisis means sentiment can only improve from here, sparking a further rally off recent lows for stocks.

See: Bernstein still sees more pain ahead for stocks, until capitulation triggers bonafide rally next year

Despite recession concerns, riskier plays are back in demand. The Russell 2000
RUT,
+1.21%
of small cap stocks jumped 3.5% on Tuesday, its best gain in more than 18 months.

See: Small-caps lead stock-market surge as Russell 2000 sees biggest gain since January 2021

The S&P 500 and Nasdaq 100 sit above their 50-day moving averages for the first time in nearly three months, potentially signalling the downtrend has been finally broken after S&P 500 shed more than 20% so far this year.

“Fears of a damaging U.S. recession also have receded a little in the rear view mirror with Wall Street closing at a three-week high following some more upbeat earnings reports,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

About 10% of S&P 500 companies have reported earnings so far this quarter, and of those companies, nearly 69% have beaten analyst expectations, according to FactSet.

Electric vehicle maker Tesla is due to report after the market close Wednesday. Results in April showed the company’s revenue grew some 81% year-on-year, to around $18.8 billion, but Tesla’s latest numbers will be less cheery largely due to Covid lockdowns in Shanghai which forced the auto maker’s factory there to close temporarily.

See: Tesla earnings preview: Wall Street braces for ‘difficult’ second quarter

Kristina Hooper, chief global market strategist at Invesco, said she is especially focused on the outlooks and guidance by companies. “Are there specific themes that we hear from multiple companies, especially in different industries?” Hooper said. “The earnings are just looking in the rearview mirror.”

In U.S. economic data, existing-home sales fell 5.4% to a seasonally adjusted annual rate of 5.12 million in June, the National Association of Realtors said Wednesday. This is the weakest level of sales since June 2020, during the COVID-19 lockdown. Economists polled by the Wall Street Journal expected sales to be 5.36 million.

Companies in focus

• Shares of Biogen Inc.
  BIIB,
  -3.95%
   lost 3.8% Wednesday after the company missed on revenue in the second quarter of the year. 

• Shares of Baker Hughes Co.
  BKR,
  -10.56%
  tanked 11% Wednesday, after the oilfield products and services company reported second-quarter results that missed expectations, as component shortages, supply chain inflation and the suspension of Russian operations weighed on results.

• AMC Entertainment Holdings Inc.
  AMC,
  +6.36%
   shares gained 6.5% Wednesday, after the movie theater operator and “meme” stock said it paid about $50 million to repurchase about $72.5 million of its 10.0% second lien debt due 2026, representing about a 31% discount. 

• Bath & Body Works Inc. 
  BBWI,
  -1.36%
  shares declined 2% Wednesday after the retailer issued a downward revision of its second-quarter and full-year guidance. 

• Netflix
  NFLX,
  +6.59%
  was up after reporting it lost half as many subscribers as feared in the second quarter and expects to add even more in the current quarter.

How are other assets faring

• Oil futures were lower with U.S. crude futures
  CL.1,
  -0.69%
  off 1.6% to $102.35 a barrel.

• The 10-year Treasury yield
  TMUBMUSD10Y,
  3.036%
  lost 5.6 basis points to 3.009% and U.K. 10-year yields
  TMBMKGB-10Y,
  2.143%
  declined 5.7 basis points to 2.123% after a report showed inflation in Britain hitting a fresh 40-year high of 9.4% in June.

• Gold
  GC00,
  -0.30%
  fell 0.1% to $1708.3 an ounce.

• Bitcoin
  BTCUSD,
  +3.67%
  advanced 3.4% to $24,108.

• Asian markets got a lift from Wall Street’s powerful showing overnight, with tech leading the way. Hong Kong’s Hang Seng
  HSI,
  +1.11%
  rose 1.1%, the Shanghai Composite
  SHCOMP,
  +0.77%
  climbed 0.8%, and Japan’s Nikkei 225
  NIK,
  +2.67%
  jumped 2.7%.