Opening Bell: Deluge Of Earnings Beats Helps Stocks Brush Off China, Iran Risk

Key Events

Futures on the S&P 500, Dow and NASDAQ 100 traded higher this morning on hopes that some corporate heavyweights would deliver solid results, dissipating worries over the effect of a prolonged trade war on global growth prospects.

Strong earnings beats from Coca-Cola (NYSE:KO), Biogen (NASDAQ:BIIB), United Technologies (NYSE:UTX) and Harley-Davidson (NYSE:HOG) helped U.S. contracts extend yesterday's tech-led rally, as investors pinned their hopes on more earnings boons to come, with companies such as Chubb (NYSE:CB), Visa (NYSE:V), Chipotle (NYSE:CMG) and Snap (NYSE:SNAP) set to report after market close.

A deal sealed by U.S. Congress yesterday to suspend the country's debt ceiling until mid-2021 also drove futures higher.

European shares on the STOXX 600 rallied on thin volumes after upbeat earnings releases from the likes of UBS (SIX:UBSG), Apple-supplier AMS (VIE:AMS) and Banco Santander(MC:SAN) (MC:SAN). The pan-European index, however, found resistance by last week’s highs, after falling below its short-term uptrend line since June 3. Technically, the index's price is sandwiched between the medium-term downtrend and the long-term uptrend, with the 200-week MA adding downward pressure.

In the earlier Asian session, stocks advanced on U.S.-China trade negotiations optimism after U.S. Treasury Secretary Steven Mnuchin said trade envoys from the two sides will finally resume face-to-face meetings, helping to offset the market impact of heightened Persian Gulf tensions. Japan’s Nikkei (+0.95%) outperformed with Pulp & Paper, Railway & Bus and Real Estate. South Korea’s KOSPI gained 0.39%, continuing to benefit from last week's rate cut.

Global Financial Affairs

In yesterday’s U.S. session, Technology (+1.15%) shares were the obvious leaders after Morgan Stanley increased its price target for the sector and Goldman Sachs upgraded Micron Technology (NASDAQ:MU) to buy from neutral. The sector posted almost triple the results compared with the runner up, Energy (0.46%), which climbed on Mideast risk after Iran sentenced 17 men to death accusing them of being CIA spies.

While Treasurys were steady, the dollar climbed for the third day after bouncing for the second time off the 200 DMA, breaching the upper boundary of a short-term falling channel since the May top.

The pound, conversely, fell for a third day before rebounding mildly as former Foreign Secretary Boris Johnson, a hard-Brexit advocate, was formally named prime minister, opening a new phase of uncertainty over negotiations with EU leaders.

Oil dropped after extending yesterday’s advance—its biggest in a week—on persisting Iran tensions. In a further twist that tied the Mideast front to the trade war front, the U.S. sanctioned Chinese state-run energy company Zhuhai Zhenrong on Monday for violating U.S. restrictions on Iranian oil.

Up Ahead

• Earnings season rolls on with companies including: Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Unilever (LON:ULVR), Caterpillar (NYSE:CAT), McDonald’s (NYSE:MCD) and Boeing (NYSE:BA).
• Facebook (NASDAQ:FB) is reporting on Wednesday after market close, with analysts expecting the social media giant could show that growth was unhurt by recent reputational challenges.
• The European Central Bank will unveil its monetary policy decision and holds a press conference on Thursday. Economists widely expect officials to signal their readiness to cut interest rates and potentially broaden stimulus. Some see the chance of an immediate rate cut.

Market Moves

Stocks

• The U.K.’s FTSE 100 rose 0.5% to the highest in a week.
• The MSCI Asia Pacific Index climbed 0.3%.
• The MSCI Emerging Market Index increased 0.1%.

Currencies

• The Dollar Index gained 0.2% to the highest in two weeks and near a 6-week high.
• The British pound dropped 0.3% to $1.2435.
• The Japanese yen fell 0.2% to 108.13 per dollar, the weakest in a week.
• The euro slid 0.2% to $1.1189, the weakest in more than seven weeks.

Bonds

• The yield on 10-year Treasurys rose one basis point to 2.05%.
• Germany’s 10-year yield gained less than one basis point to -0.34%, the first advance in a week.
• Britain’s 10-year yield was unchanged at 0.708% to the lowest in almost three weeks.

Commodities

• Gold declined 0.4% to $1,418.79 an ounce, the weakest in a week, as investors wait impatiently for next week's interest rate decision, paramount for the yellow metal's price direction.
• West Texas Intermediate crude increased 0.2% to $56.32 a barrel.