Stock Buyers Step In to Drive Wall Street Rebound

Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, offers her S&P target and talks about risks to the market.

A renewed wave of dip buying lifted stocks, with traders wading through solid earnings amid bets the Federal Reserve will soon cut rates. Treasuries halted their rally ahead of a heavy slate of US debt sales.

Equities halted a four-day slide, with the S&P 500 up over 1% and set for its biggest gain since May. Tech megacaps, which bore the brunt of the recent selling, led the bounce. Corporate results also buoyed sentiment, with 82% of the companies in the US stock benchmark so far beating estimates.

Investors should buy into the selloff in US stocks because of the robust earnings outlook for the coming year, said Morgan Stanley’s Michael Wilson. At Goldman Sachs Group Inc., David Kostin noted executives had so far sounded confident in their ability to mitigate the impact of tariffs on profits.

S&P 500 firms are on track to post a 9.1% jump in profits, far above analysts’ projection of 2.8%, according to data compiled by Bloomberg Intelligence. The share of companies beating estimates is also the highest in four years.

“This week is a quiet one on the economic calendar, so traders may be taking their cues from earnings, along with any new tariff and trade developments,” said Chris Larkin at E*Trade from Morgan Stanley.

Larkin also noted that a key question now is whether traders will view any signs of economic weakness as a market negative, or as a catalyst for the Fed to cut rates sooner rather than later.

The yield on 10-year Treasuries was little changed at 4.22%. The dollar wavered. Oil fell as investors took stock of OPEC+’s latest bumper supply increase, helping to counter concerns that tensions between Washington and the Kremlin may impact Russian flows.

“If the Fed starts to cut rates at its September meeting, we believe this would be supportive for markets,” said David Lefkowitz at UBS Global Wealth Management. “In combination with our positive view on earnings, we expect further upside for US stocks over the next 12 months.”

Societe Generale strategists Manish Kabra and Charles de Boissezon see US stocks extending their climb into next year, lifted by the Fed’s looming rate cuts.

“Fed cuts to shape the index,” they wrote, adding that gradual cutting would be positive, while aggressive cuts could drive markets to a valuation bubble.

While Friday’s jobs report doesn’t mean we are entering a recession, it shows that companies are freezing hiring and firing until there is more policy certainty and business confidence, according to Robert Ruggirello at Brave Eagle Wealth Management.

“The slowing labor market makes a Federal Reserve rate cut easier than it was a week ago, and echoes some of the warnings that Jerome Powell has been sounding about how tariffs could slow the economy and cause too much uncertainty for small business hiring plans,” he said.

As investors across Wall Street eagerly piled into US stocks in July, sending the S&P 500 to 10 all-time highs in a month, a notable group was heading in the opposite direction: corporate executives.

Insiders at just 151 S&P 500 companies bought their own stocks last month, the fewest since at least 2018, according to data compiled by the Washington Service. And while July’s selling by corporate insiders slowed from June’s pace, purchases dropped even more, pushing the ratio of buying-to-selling to the lowest level in a year, the data shows.

“In the near term, risk-on sentiment may need to contend with an economic outlook of slowing growth, elevated inflation, and ongoing policy uncertainty. So far, companies have navigated the tariff noise without much visible strain, but pressures are likely to grow,” said Seema Shah at Principal Asset Management.

Tariffs

On the tariff front, President Donald Trump said he would be “substantially raising” the tariff on Indian exports to the US over New Delhi’s purchases of Russian oil, ramping up his threat to target a major trading partner.

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