US stock markets experienced a robust rebound on July 21st, snapping a three-day losing streak, with the Nasdaq Composite leading the gains, climbing 1.29% to 25,837.21. The S&P 500 rose 0.89% to 7,509.20, and the Dow Jones Industrial Average advanced 0.74% to 52,224.64. This rally was primarily driven by a surge in chip stocks, with the VanEck Semiconductor ETF jumping 4.52%, and individual companies like SanDisk and Micron Technology seeing significant increases of 14.27% and 12.17% respectively. The positive sentiment was also fueled by strong corporate earnings reports.
The second-quarter earnings season has commenced on a positive note, with approximately 66 S&P 500 companies having reported results so far. An impressive nearly 88% of these companies have surpassed market earnings expectations, according to data from US financial firm FactSet. This led to an increase in market expectations for corporate earnings growth to 25% since the start of the season. Industrial giant 3M played a significant role in boosting market confidence, with its shares soaring 7.32% after reporting adjusted earnings of $2.40 per share on net sales of $6.5 billion, both exceeding analyst estimates. General Motors also contributed positively, gaining 4.91% after both its second-quarter revenue and profit beat forecasts.
However, some analysts express caution despite the strong start. Bret Kenwell, a US investment analyst at eToro, noted that while results are good, stocks are "priced for perfection." He warned that the next two critical weeks will determine the outcome of this earnings season, emphasizing that companies failing to meet Wall Street's elevated expectations will be penalized. Kenwell highlighted that the "burden of proof has changed," and investors now demand strong growth and guidance to justify current high valuations, unlike the previous quarter where the focus was on geopolitical impact.
Upcoming earnings reports from tech giants like Alphabet, Tesla, Intel, and IBM are keenly awaited. Sam Stovall, chief investment strategist at CFRA Research, voiced concerns that earnings growth might be nearing an inflection point, with investors in a "wait-and-see" mode, particularly for guidance from companies like Nvidia and AMD. Other market movements included a rise in international oil prices, with WTI August crude futures up nearly 2.02% to $84.91 per barrel and Brent September crude futures rising 2.00% to $91.01 per barrel. Gold advanced 1.69% to nearly $4,100 per ounce, and silver surged 4.23%.
