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Wall Street climbs as earnings optimism overshadows rising yields

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The Nasdaq rebounded nearly 2% on Tuesday, leading Wall Street’s major indexes higher as investors focused on positive earnings reports while putting aside concerns about aggressive policy moves to stem inflation.

Shares of megacap companies, including Microsoft Corp, Apple Inc and Amazon.com Inc, rose between 0.9% and 3.0% even as Treasury yields extended a recent rally.

Johnson & Johnson rose 3.5% to a record high as the drugmaker’s quarterly profit beat market expectations and increased its dividend.

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“People have entered this season of overly pessimistic earnings — overweight cash and commodities, panic selling bonds and technology,” said Thomas Hayes, chairman of Great Hill Capital in New York.

“But the advice is not going down as much as people expected. We’re going to see more of that throughout this earnings season, especially in the tech sector, which everyone couldn’t be more pessimistic about heading into earnings season.

Of the 49 companies in the S&P 500 index that have reported quarterly earnings so far, 79.6% have exceeded earnings estimates, according to data from Refintiv. Overall, 66% exceeded estimates.

Streaming giant Netflix Inc and IT firm International Business Machines Corp, which are expected to report after the closing bell, gained 3.7% and 1.6% respectively.

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St. Louis Federal Reserve Chairman James Bullard on Monday reiterated his plea for a rate hike to 3.5% by the end of the year to curb inflation at its 40-year high. years. He also said he was not ruling out a 75 basis point rate hike.

Stocks appeared to brush off the comments, but bonds fell, pushing the 30-year yield to 3% for the first time since April 2019 as investors adjusted to faster interest rate hikes this year.

As of 12:14 p.m. ET, the Dow Jones Industrial Average was up 439.20 points, or 1.28%, at 34,850.89, the S&P 500 was up 58.47 points, or 1.33%, at 4,450.16, and the Nasdaq Composite was up 247.88 points, or 1.86. %, at 13,580.24.

Ten of the S&P’s 11 major sub-sectors were higher. Energy stocks fell 0.8% as oil prices fell 5% after the International Monetary Fund cut its growth forecast for the global economy and warned of higher inflation.

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Halliburton Co fell 1% even as the oil services company posted an 85% increase in first-quarter adjusted profit as higher crude prices boosted demand for its services and equipment.

Twitter Inc slipped 0.8%. According to reports, more private equity firms have expressed interest in participating in a deal for the microblogging site.

Travelers Cos Inc fell 5.1% even as the property and casualty insurer posted better-than-expected quarterly profit.

Advancing issues outnumbered declining issues with a 2.06-to-1 ratio on the NYSE and a 3.01-to-1 ratio on the Nasdaq.

The S&P index recorded 30 new 52-week highs and 11 new lows, while the Nasdaq recorded 56 new highs and 322 new lows. (Reporting by Sruthi Shankar and Devik Jain in Bengaluru; Editing by Anil D’Silva, Arun Koyyur and Sriraj Kalluvila)

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