Stock Market Today: Stocks Extend Rally On Earnings Power As Bulls Seize Control

With volatility easing and earnings topping forecast, Wall Street is riding one of its strongest three-day rallies of the year heading into the start of Tuesday trading.

U.S. equity futures powered higher again Tuesday, as the dollar held steady against its global peers, as investors looked to the release of blue-chip earnings and calming bond market sentiment to sustain Wall Street’s recent really.

The U.S. dollar index, which tracks the greenback against a basket of global currencies and often acts as a proxy for broader risk sentiment, edged 0.11% higher in early New York trading as markets appeared soothed by the revised tax and spending plans from Britain’s new finance minister Jeremy Hunt.

Hunt, who has essentially shredded the economic agenda of new Prime Minister Liz Truss, has said tax hikes and spending cuts will likely feature in his late October budget, while the Financial Times reported that the Bank of England will delay plans to see around $950 billion worth of bonds from its balance sheet in order to ensure bond market stability.

The elimination of that near-term risk has allowed investors to shift focus to the U.S. earnings season, where collective S&P 500 profit are forecast to rise by 3.6% to around $462 billion. And with big-name reports from Johnson & Johnson, Goldman Sachs, Netflix and Tesla due over the next two days, investors are hoping that better-than-expected updates gain sustain a solid two-day rally on Wall Street, which has added around 118 points to the S&P 500 since Thursday night’s close.

Market volatility has also eased, albeit modestly, with the Vix index, the CBOE group’s key volatility gauge, falling 3.84% overnight to 30.79 points. That move, however, still suggests daily swings of around 70 points over the next 30 days for the biggest U.S. benchmark.

Benchmark 10-year U.S. 10-year notes yields, meanwhile, are holding near 4% in overnight trading while interest rate traders bet on a 96.2% chance of a 75 basis point rate hike from the Federal Reserve next month, following last week’s hotter-than-expected September inflation reading of 8.2%, with bets on a fifth consecutive move in December rising to 69.1%.

In other markets, global oil prices edged lower amid reports that President Joe Biden is planning to unveil another release of crude from the nation’s emergency reserves in an effort to reduce energy costs heading into the mid-term elections.

WTI crude futures for November delivery were marked 43 cents lower in early Tuesday trading to change hands at $85.03 each. Brent crude contracts for December delivery, the global pricing benchmark, fell 46 cents to $91.14 per barrel.

On Wall Street, futures contracts tied to the S&P 500 are indicating a 75 point opening bell gain, while those linked to the Dow Jones Industrial Average are priced for a rally of around 550 points. The tech-focused Nasdaq is priced for a 245 point gain.

Goldman Sachs Group  (GS) – Get Goldman Sachs Group Inc. (The) Report shares jumped 3% after the investment bank posted firmer-than-expected third quarter earnings, declared a $2.50 dividend and unveiled plans to restructure its four business divisions.

Johnson & Johnson  (JNJ) – Get Johnson & Johnson Report rose 2% after it released stronger-than-expected third quarter earnings, while lifting its full-year profit forecast, as solid pharmaceuticals sales offset a slide in Covid vaccine revenues. 

Netflix  (NFLX) – Get Netflix Inc. Report shares moved 2% higher as investors looked to the streaming media group’s third quarter earnings after the closing bell with an eye on the impact of its upcoming ad-supported service on subscriber and revenue growth.

Stocks in Europe were also higher, with London’s FTSE 100 up 1.16% and the region-wide Stoxx 600 rising 0.95% in mid-day Frankfurt trading. Overnight in Asia, Japan’s Nikkei 225 ended 1.42% higher as the yen fell to another 32-year low of 149.10 against the dollar, while the MSCI ex-Japan index added 1.5% into the final hours of trading.

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