U.S. stocks gained more than 1 percent on Monday amid an unexpected stimulus from China’s central bank as investors kept eyeing corporate earnings.
“We’re looking at a bounce because of options expiration on Friday and China’s stimulus,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “The move this morning is technical, and because it is technical I’m cautious.”
On Sunday, China’s central bank lowered the reserve requirement ratio for all banks by 100 basis points.
The wider-than-expected cut was the People’s Bank of China’s second reduction in two months, and marks a continuing effort by the world’s second-largest economy to combat slowing growth.
In late-morning trading, the Dow Jones Industrial Average reached a session high, soaring over 260 points, putting it on track for its first gain of 1 percent or more since March 30.
“We had a pretty negative day on Friday, and it’s not uncommon to see a bounce after a selloff like that,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.
U.S. markets closed considerably lower on Friday, with the Dow Jones Industrial Average shedding more than 350 points at its session low.
Nevertheless, Maris Ogg, president at Tower Bridge Advisors, said “the most important thing to look for is earnings. Earnings have been really mixed [thus far].”
Of the 59 SP 500 companies that had reported by last week, 75 percent had topped profit expectations, above the 70 percent average for the last four quarters, according to Thompson Reuters . However, only 45 percent of companies beat revenues estimates, compared with 58 percent in the last four quarters.
Several companies posted quarterly earnings report Monday morning, including Morgan Stanley, Hasbro, Halliburton and SunTrust.
Morgan Stanley (MS) earned an adjusted 85 cents per share, beating estimates of 78 cents, with revenue also above forecasts. Morgan Stanley’s results were helped in part by better than expected performance in investment management and fixed income.
Hasbro (HAS) reported quarterly profit of 21 cents per share, swamping estimates of eight cents, with revenue also beating forecasts by a wide margin despite the negative impact of the strong dollar. Hasbro saw particularly strong performance in its Transformers and pre-school units. The company’s shares also hit an all-time high earlier in the session.
Halliburton (HAL) also beat estimates by 12 cents with adjusted quarterly profit of 49 cents per share, with revenue scoring a slight beat as well. But Halliburton does say it expects the oil sector to remain “challenged”.
SunTrust (STI) earned 78 cents per share for its latest quarter, six cents above estimates, with revenue essentially in line. SunTrust was helped by lower expenses, and growth in noninterest income.
William Dudley, president of the New York Federal Reserve Bank, also delivered remarks on Monday in which he said economic performance will be the determining factor on when the central bank will raise rates.
“Whether they raise rates in June, October or December, it doesn’t matter.” Ogg added. This is so because, whenever the central bank does decide to lift rates, it will be because it believes the economy is strong enough to handle it, she also said.
Investors also kept an eye on negotiations between Greece and the euro zone. “With respect to Greece, both sides went back and forth over the weekend with no progress. The Greek Finance Minister is threatening the EU with the chaos that would envelope if Greece left the euro but at the same time is just expecting to get more money with almost no conditions attached,” Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.
Another element being eyed by investors is the oil sector, said Art Hogan, chief market strategist at Wunderlich Securities. “I think we’ve found a bottom in the energy sector, at least in the near-term.”
WTI futures rose more than 1.5 percent to trade near $57 per barrel on Monday, while Brent crude rose to trade near $64. The Energy sector rose more than 1.1 percent.
The Dow JonesIndustrial Average (Dow Jones Global Indexes: .DJI) rose 230 points, or about 1.3 percent, at 18,056, led by Boeing (BA) and Apple (AAPL).
The SP 500 (^GSPC) traded up 20 points, or 1 percent, at 2,102, with Utilities and Information Technology leading all sectors.
The Nasdaq (^IXIC) traded up 57 points, or about 1.2 percent, at 4,988, with the iShares Nasdaq Biotechnology ETF edging up about 0.4 percent.
Advancers led decliners 11 to three at the New York Stock Exchange with an exchange volume of 245 million and a composite volume of 1.17 billion.
U.S. crude (New York Mercantile Exchange: @CL.1) rose about 2 percent to trade above $56 per barrel, while Brent futures (Intercontinental Exchange Europe: @LCO.1) rose about 0.2 percent to $63.56.
The benchmark U.S. 10-Year yield traded around 1.87 percent.
Gold traded down about $10 to $1,192.
The dollar index (New York Board of Trade (Futures): =USD), which measures the greenback’s performance against a basket of currencies, rose about 0.3 percent to 97.78. The euro traded lower against the dollar at about $1.07.
On tap this week:
Monday
Earnings: IBM, Canadian National Railway,BancorpSouth, BBCN Bancorp, Pinnacle Financial, Zions Bancorp, Steel Dynamics
Tuesday
Earnings: Verizon, United Technologies, Amgen, Yahoo, Travelers, SAP SE, Dupont, Discover Financial, Credit Suisse, Baker Hughes, Canadian Pacific, Lockheed Martin, Gannett, Stryker, Yum Brands, Chipotle Mexican Grill,Cree, Broadcom, VMWare, Kimberly Clark
Wednesday
Earnings: Boeing, Coca-Cola, McDonald’s, ATT, Facebook, eBay,Petrobras, Qualcomm, F5 Networks, Six Flags, Ryder System, Angie’s List, T. Rowe Price, Abbott Labs, EMC, Bank of NY Mellon, St. Jude Medical, DR Horton, Texas Instruments, Cheesecake Factory, Xilinx,SLM, Raymond James
9:00 am: FHFA home prices
10:00 am: Existing home sales
Thursday
Earnings: 3M, Amazon.com, Google, Microsoft, Altria, Caterpillar, Dow Chemical, General Motors, Pepsico,Procter and Gamble, Novartis, Eli Lilly, Union Pacific, Hershey, Freeport-McMoRan, KKR, Domino’s Pizza,Johnson Controls, PulteGroup, Dunkin Brands, Raytheon,Starbucks, Capital One, Juniper Networks, Newmont Mining,Southwest Airlines, Pandora
8:30 am: Initial claims
9:45 am: Manufacturing PMI
10:00 am: New home sales
Friday
Earnings: Biogen, AstraZeneca, American Airlines Group, Cabot Oil and Gas, State Street, Xerox, A.O. Smith, Tyco
8:30 am: Durable goods
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-CNBC’s Peter Schacknow, Tom DiChristopher and Reuters contributed to this report.
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