By Dan Strumpf
U.S. stocks bounced back on Monday from Friday's steep declines,
lifted by upbeat earnings news and an announcement of more stimulus
from China.
Stocks kicked off the session sharply higher and stuck to a
narrow trading range through the afternoon. The Dow Jones
Industrial Average rose 208.63 points, or 1.2%, to 18034.93. The
S&P 500 added 19.22, or 0.9%, to 2100.40. The Nasdaq Composite
Index gained 62.79, or 1.3%, to 4994.60.
A handful of better-than-expected earnings reports Monday,
coupled with a recovery in many markets overseas and new stimulus
efforts from China, helped propel lift stocks higher following
Friday's downdraft. At the same time, traders said the selloff
sparked interest from some bargain-minded investors.
"The dips, for whatever the reasons, continue to be a better
buying opportunity than a selling opportunity," said Ted Weisberg,
trader at Seaport Securities. "It underscores the fact that the
market continues to show a positive resilience to bad news."
Investors have also been encouraged that earnings reports have
largely been "in line with lowered expectations," said Larry Weiss,
head of trading at Instinet.
This week marks a key period in the first-quarter earnings
season, with about 30% of companies in the S&P 500 scheduled to
report results, according to FactSet.
Dim profit expectations have been an obstacle to stocks in
recent weeks, with major indexes stalling near their record highs
last reached in early March. Analysts expect first-quarter profits
for S&P 500 companies to fall 4.5%, including the 51 companies
that have already reported results, according to FactSet. Market
watchers have blamed the expected decline on the stronger dollar
and the steep fall in oil prices.
"If you go back just two weeks ago, there was an awful lot of
angst and uncertainty about currency effects, about energy, and
about how those things would play out when we got into earnings
season," said Brian Lazorishak, manager of the $100 million Chase
Growth fund. "As we get into the actual numbers, we're hopeful that
at least a lot of those effects are either not as bad as feared or,
to a large degree, priced in."
Mr. Lazorishak said he has been steering clear of companies set
to post weaker earnings, such as the energy sector. He remains
parked in health care, consumer and technology companies. "It's
stock by stock, but we're seeing more [growth] in those areas."
Morgan Stanley's first-quarter profit and revenue rose, beating
Wall Street estimates, as the bank benefited from a stronger
environment for deals and trading. Shares rose 0.6%.
Hasbro Inc. shares jumped 13%, posting the biggest rise in the
S&P 500, after the toy maker posted better-than-expected
revenue and profits, despite negative foreign exchange impact.
Shares of Halliburton Co. rose 2.1% after the oil-field services
provider reported revenue and earnings that surpassed analyst
expectations.
Gains in European stocks added to the positive tone. Germany's
DAX advanced 1.7% and France's CAC 40 added 0.9%. The Stoxx Europe
600 rose 0.8%, after posting its worst daily loss in three months
on Friday.
Meanwhile, a move from China's central bank to free up about
$200 billion for banks to lend drew investor attention across the
globe. The People's Bank of China on Sunday announced it would cut
the reserve requirement by one percentage point, its second
reduction in less than a quarter and the biggest since December
2008.
Chinese stocks fell despite the positive news. Hong Kong's Hang
Seng Index posted its biggest one-day decline this year, while the
Shanghai Composite fell 1.6%.
On Friday, major U.S. stock indexes posted their biggest drop
since late March, sinking on jitters over Greece's debt and a batch
of disappointing earnings reports.
Among other shares showing big moves, Merck & Co. stock
gained 1.3% after a study showed positive results for its new
cancer drug Keytruda. Merck also said it has filed for U.S.
regulatory approval to market its drug as a treatment for lung
cancer.
Shares of International Business Machines Corp. rose 3.4% ahead
of first-quarter earnings due after the closing bell. In
after-hours trading, shares tacked on another 2.5%.
In commodity markets, gold futures slipped 0.8% to $1193.50 an
ounce. Crude-oil futures rose 1.1% to $56.38 a barrel, helping to
lift shares of energy companies.
The yield on the 10-year note rose to 1.897% from 1.849% on
Friday. Yields rise as prices fall.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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