Stocks Roar Back With S&P 500, Nasdaq 100 Up 2%: Markets Wrap

(Bloomberg) — US stocks extended gains as investors assessed the outlook for earnings amid speculation disappointments may be already priced into markets.

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The S&P 500 jumped more than 2%, with all 11 industry groups rising. The broad rally was mirrored in the tech-heavy Nasdaq 100, as megacaps Apple Inc. and Alphabet Inc. bounced back from Monday’s losses ahead of Netflix Inc.’s earnings due later today. Johnson & Johnson gained even as it lowered its earnings and revenue forecast for the year.

With the potential for earnings disappointments baked into markets, any upside surprises may lead to outsized gains. Investors remain on high alert for signs that high inflation and monetary tightening are squeezing consumers and employment, with allocation to stocks plunging to levels last seen in October 2008, according to the latest Bank of America Corp.’s monthly fund manager survey.

“Earnings, so far, there’s been some caution and there’s been a little bit of dialing down of expectations, but I don’t think the worst-case scenarios are really in play anymore,” Shawn Cruz, head trading strategist at TD Ameritrade, said in an interview. “We’ve heard from the big banks, we’ve heard from IBM, we’ve heard from Johnson & Johnson, we’ve heard from enough companies that have had a big enough footprint that if there is something at the macro level severely impacting these businesses, it would have shown up in a lot of these earnings.”

Also on the earnings front, Hasbro Inc., the largest US toy company, gained after earnings beat analyst estimates, while International Business Machines Corp. fell as the tech company lowered its forecasts for free cash flow.

In other company news, Twitter Inc. shares gained as a Delaware judge allowed the social media company to fast-track its lawsuit against Elon Musk, with the trial set to take place in October.

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The dollar fell against its Group-of-10 peers. Treasuries traded lower, with the 10-year yield rising back to 3%.

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