U.S. stocks rallied for a second straight session as investors geared up for some of the world’s biggest companies to report earnings this week. Traders also mulled whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data that released Monday. 

More than 80 per cent of stocks in the S&P 500 index closed in green on Monday, buoyed by gains in technology and health-care companies. The Nasdaq 100 also rose more than 1 per cent. U.S.-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc. 

U.S. Treasury 10-year yields ended the session around 4.25 per cent. U.K. bonds posted some of their biggest gains on record as investors expect incoming Prime Minister Rishi Sunak to repair the damage caused by predecessor Liz Truss after her massive package of unfunded tax cuts roiled financial markets. 

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Earnings remain in focus in the U.S., with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20 per cent of companies that have reported so far, roughly 58 per cent posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. As the Fed attempts to stomp out inflation, latest earnings displaying resilience and showing few signs of recession may be making some investors uneasy on equities. 

“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, said on Bloomberg Television. “But the big picture -- and I don’t think this changes -- is that we still view this as a bear market rally rather than the start of a larger new bull market.”

Fed policy is also still a key focus for investors. Data on Monday indicated that Fed tightening is starting to hit the economy, with Purchasing Managers’ Index indicators showing contraction in the services and manufacturing sectors. Reports that the Fed may soon start reducing the size of its rate hikes had pushed stocks higher by more than 2 per cent on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. But some investors are still cautious in their expectations that the central bank is moderating its rhetoric. 

“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”

The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said. 

Key events this week:

• Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
• U.S. Conference Board consumer confidence, Tuesday
• Bank of Canada rate decision, Wednesday
• ECB rate decision, Thursday
• U.S. GDP, durable goods orders, initial jobless claims, Thursday
• Bank of Japan policy decision, Friday
• U.S. personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.2 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 1.1 per cent
• The Dow Jones Industrial Average rose 1.3 per cent
• The MSCI World index rose 1.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.4 per cent
• The euro rose 0.1 per cent to US$0.9873
• The British pound fell 0.2 per cent to US$1.1279
• The Japanese yen fell 0.9 per cent to 148.98 per dollar

Cryptocurrencies

• Bitcoin fell 0.8 per cent to US$19,341.76
• Ether rose 1.1 per cent to US$1,344.95

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.25 per cent
• Germany’s 10-year yield declined nine basis points to 2.33 per cent
• Britain’s 10-year yield declined 31 basis points to 3.75 per cent

Commodities

• West Texas Intermediate crude fell 0.5 per cent to US$84.66 a barrel
• Gold futures fell 0.1 per cent to US$1,654.20 an ounce