Stocks Bounce Amid Earnings Reports

Mike Wilson, Chief US Equity Strategist at Morgan Stanley, joins for an extended discussion on the equity rally and his rate cut expectations for the remainder of this year.

Stocks rebounded as Wall Street waded through a fresh batch of earnings reports. Treasuries saw mild moves ahead of a $42 billion sale of 10-year bonds. The dollar fell.

The S&P 500 edged up after a slide fueled by economic worries. Apple Inc. climbed about 3.5% as President Donald Trump is set to announce the firm will commit to another $100 billion investment on domestic manufacturing. McDonald’s Corp. gained as sales picked up in the latest quarter. Uber Technologies Inc. unveiled $20 billion in new stock buybacks.

Earnings for S&P 500 companies are crushing second-quarter expectations — up 9.1%, triple the pre-season forecast and the strongest beat rate since 2021, according to data compiled by Bloomberg Intelligence.

“There are a lot of narratives to keep track of in today’s investing environment, but earnings remain the main catalyst for stocks,” said Bret Kenwell at eToro. “While pullbacks are possible — particularly due to macro-related influences and poor seasonality trends — those pullbacks will likely prove to be buying opportunities.”

Short-dated Treasuries outperformed the rest of the curve, with two-year yields little changed at 3.73%. Federal Reserve Bank of Minneapolis President Neel Kashkari said a slowing of the US economy may make an interest-rate cut appropriate in the near term, and he still sees two cuts by year’s end.

Stocks remain buoyant as betting against the market momentum “feels almost irrational,” according to a macro trader at Goldman Sachs Group Inc.

“The key point is that the market can’t look far enough. This is why it will ignore the recession risk,” Paolo Schiavone wrote.

“While trade uncertainty and elevated valuations could be a modest headwind for equities in the near term, investors can consider ways to manage volatility while positioning for longer-term gains,” said Mark Haefele at UBS Global Wealth Management.

Those who are already allocated to equities in line with their strategic benchmarks should consider implementing short-term hedges, and those under allocated should prepare to add exposure on potential market dips, he noted.

Stocks remain buoyant as betting against the market momentum “feels almost irrational,” according to a macro trader at Goldman Sachs Group Inc.

“The key point is that the market can’t look far enough. This is why it will ignore the recession risk,” Paolo Schiavone wrote.

“While trade uncertainty and elevated valuations could be a modest headwind for equities in the near term, investors can consider ways to manage volatility while positioning for longer-term gains,” said Mark Haefele at UBS Global Wealth Management.

Those who are already allocated to equities in line with their strategic benchmarks should consider implementing short-term hedges, and those under allocated should prepare to add exposure on potential market dips, he noted.

Still, after the blistering rally in American equities, the Bloomberg Intelligence Market Pulse Index pushed to a “manic” reading last month, a sign that investor exuberance may be running too hot.

The measure combines six metrics like market breadth, volatility and leverage to deliver a reading on investor sentiment. When it gets into overheated territory, returns tend to weaken in the following three months.

Meantime, bond traders are ramping up bets on the Federal Reserve cutting interest rates this year, as signs of a weakening US economy bolster the case for the central bank to reduce borrowing costs as demanded by President Trump.

Positioning in options tied to the Secured Overnight Financing Rate, which closely tracks the expected trajectory of US monetary policy, shows investors readying for the possibility of cuts in each of the three remaining meetings this year, bringing down rates by a total of 75 basis points in 2025.

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