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 202 points, or 1.1%, to 18028 in afternoon
trade. The S&P 500 added 18 points, or 0.9%, to 2099. The
Nasdaq Composite Index gained 59 points, or 1.2%, to 4991.
The rebound follows a global selloff Friday fueled by jitters
over Greece's finances and a batch of subpar earnings reports. But
an improvement in the earnings picture Monday, coupled with a
recovery in many markets overseas, helped propel stocks from their
lows.
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.
Traders said the news--aimed at shoring up China's slowing
economy--was encouraging to investors here, even as Chinese stocks
declined. At the same time, they said Friday's downdraft was
sparking interest from some bargain-minded investors.
"People are certainly stepping in and dipping their toe in the
water here," said Larry Weiss, head of trading at Instinet. "There
is this general sense in the market over the past couple of years
that people don't want to miss the rally."
Investors have also been encouraged that earnings reports have
largely been "in line with lowered expectations," he said.
The coming 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 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 sectors that
are set to post weak earnings, such as the energy sector. Instead,
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 1.2%.
Hasbro Inc. shares jumped 11%, 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 2.6% 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.
Chinese stocks fell despite the positive news from China. Hong
Kong's Hang Seng Index posted its biggest one-day decline this
year, while the Shanghai Composite fell 1.6%.
On Friday, the Dow lost 1.5% to 17826.30. The S&P 500 fell
1.1%, to 2081.18, and the Nasdaq Composite lost 1.5% to
4931.81.
Among other shares showing big moves, Merck & Co. stock
gained 1% 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.
In commodity markets, gold futures slipped 0.4% to $1198.50 an
ounce. Crude-oil futures rose 2% to $56.84 a barrel, helping to
lift shares of energy companies.
The yield on the 10-year note rose to 1.894% from 1.849% on
Friday. Yields rise as prices fall.
Write to Dan Strumpf at daniel.strumpf@wsj.com
Access Investor Kit for Halliburton Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4062161017
Access Investor Kit for Hasbro, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4180561072