Stocks Rally as Earnings Season Heats Up…..

U.S. equities finished solidly higher amid a ramp up in earnings season this week, and despite more hawkish Fedspeak. Dow components Johnson & Johnson and Travelers Companies, as well as Lockheed Martin, posted better-than-expected earnings, but the latter two missed revenue estimates. Meanwhile, global central bank tightening remained in focus after Federal Reserve Bank of St. Louis President James Bullard said in an interview that a 75-basis point rate hike is not off the table. Additionally, the ongoing war in Ukraine continued to add to uncertainty as Russia has launched a new assault in the eastern part of the country. In economic news, housing starts and building permits surprisingly rose for March. Treasuries were lower as yields rose across the curve, and the U.S. dollar was modestly higher, while crude oil prices tumbled, and gold was sharply lower. Stocks in Europe finished to the downside in their return to action following the long holiday weekend, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 500 points (1.5%) to 34,911, the S&P 500 Index increased 71 points (1.6%) to 4,462, and the Nasdaq Composite rallied 287 points (2.2%) to 13,620. In moderate volume, 4.0 billion shares of NYSE-listed stocks were traded, and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil plunged $5.56 to $102.05 per barrel. Elsewhere, the gold spot price tumbled $36.50 to $1,949.90 per ounce, and the Dollar Index was 0.2% higher at 100.97.

Housing starts for March rose 0.3% month-over-month (m/m) to an annual pace of 1,793,000 units, above forecasts of a decline to 1,740,000 units, and compared to February’s upwardly-revised pace of 1,788,000 units. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, increased by 0.4% m/m to an annual rate of 1,873,000, north of expectations calling for 1,820,000 units, and compared to the upwardly-revised 1,865,000 unit pace in February.

Treasuries were lower, adding to a recent drop that has seen rates jump and the yield curve steepen. The bond markets have been driven primarily by expectations that the Fed is set to get substantially aggressive with tightening monetary policy to try to combat surging inflation. Recent data and comments from Fed officials have delivered details of the balance sheet reduction plan and suggested the potential for multiple rate hikes of 50 basis points (bps), which would be the first time it raised rates in excess of 25 bps in over 20 years. Fedspeak continues to garner attention and will be headlined by commentary from Chairman Jerome Powell on Thursday.

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