U.S. stocks rise as investors brace for gains from Big Tech

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U.S. stocks rose on Monday as investors braced for a busy week of earnings for blue-chip technology groups whose results will be used as a barometer of the health of the consumer economy.

The benchmark S&P 500 was up 1.4 percent by midday in New York, while the tech-heavy Nasdaq Composite was up 1 percent, continuing gains from last week, buoyed by news that the Federal Reserve may soon slow rates interest rate rises.

Those positive sentiments will be tested this week as investors examine earnings from Meta, Amazon, Microsoft and Alphabet, which will provide guidance on the strength of U.S. consumers in a year when online spending and digital advertising revenue have slowed amid rising inflation. A quartet of technology groups advanced on Monday, with Microsoft leading the way with a 2.2 percent rise.

“We believe that the full impact of tight monetary policy on the economy and corporate earnings is not yet sufficiently reflected in consensus forecasts — leading to potential disappointments,” UBS analysts wrote in a Monday note.

“Companies face a challenging combination of weaker demand, rising labor costs and unfavorable comparisons to revenue growth in 2021-2022.”

Apple, which is on Monday increased prices on its music and TV services will also report earnings this week. Its shares were up 1.8 percent in the afternoon.

In the UK, like Rishi Sunak, gilts rose sharply on Monday approved by the next Prime Minister of Great Britain, investors are betting that the former chancellor will stick to the economic policies that have calmed markets in recent days.

The yield on the 10-year gilt bond fell 0.34 percentage point to 3.71 percent, reflecting a sharp rise in prices. The pound was up as much as 0.9 percent against the dollar in early trade before falling amid broad gains in the U.S. currency, which was little changed on the day at $1.1285.

Investors believe Sunak is more likely to support new Chancellor Jeremy Hunt’s fiscal plans, which have helped restore order to the gilts market.

“Rishi Sunak has a much better chance of bringing stability to the government,” said Derek Halpenny, head of global markets research at MUFG. “He will not have the Privileges Committee inquiry into lying in Parliament that Boris Johnson has and will have the confidence of the financial markets given his staunch opposition to Liz Truss’s economic policies.”

Ten-year yields remain above levels of around 3.5 percent seen before the Truce’s failed fiscal plans last month, which collapsed gilts and sterling, sparking a liquidity crisis in pension funds and prompting the Bank of England to step in with an emergency bond-buying program. But yields on shorter-duration and longer-duration gilts fell to about the same level as before September 23.

Investors also bet that the Bank of England would be forced to raise interest rates quickly to support the pound’s fall and offset the inflationary effects of the £45bn tax cut that was unwarranted.

Interest rate expectations began to decline after Hunt announced last week that he would reverse most of the Trust’s tax cuts.

On Monday, they continued moderation. Traders expect UK interest rates to rise to just above 5 percent next summer, up from 5.25 percent last week.

The move comes after Ben Broadbent, the Bank of England’s deputy governor for monetary policy, last week raised doubts on the market’s expectation that interest rates would have to rise to more than 5 percent to reduce inflation.

The two-year gilt yield, which is highly sensitive to expected rates, fell 0.33 percentage point to 3.38 percent.

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