U.S. stocks kicked off Monday’s trading session sharply higher after an unexpected stimulus from China’s central bank as investors kept eyeing corporate earnings.
“We’re looking at a bounce because of options expiration on Friday and China’s stimulus,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “The move this morning is technical, and because it is technical I’m cautious.”
On Sunday, China’s central bank lowered the reserve requirement ratio for all banks by 100 basis points.
The wider-than-expected cut was the People’s Bank of China’s second reduction in two months, and marks a continuing effort by the world’s second-largest economy to combat slowing growth.
“We had a pretty negative day on Friday, and it’s not uncommon to see a bounce after a selloff like that,” said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.
U.S. markets closed considerably lower on Friday, with the Dow Jones Industrial Average shedding more than 350 points at its session low.
Nevertheless, Maris Ogg, president at Tower Bridge Advisors, said “the most important thing to look for is earnings. Earnings have been really mixed [thus far].”
Of the 59 S&P 500 companies that had reported by last week, 75 percent had topped profit expectations, above the 70 percent average for the last four quarters, according to Thompson Reuters. However, only 45 percent of companies beat revenues estimates, compared with 58 percent in the last four quarters.
Several companies posted quarterly earnings report Monday morning, including Morgan Stanley, Hasbro, Halliburton and SunTrust.
Morgan Stanley earned an adjusted 85 cents per share, beating estimates of 78 cents, with revenue also above forecasts. Morgan Stanley’s results were helped in part by better than expected performance in investment management and fixed income.
Hasbro reported quarterly profit of 21 cents per share, swamping estimates of eight cents, with revenue also beating forecasts by a wide margin despite the negative impact of the strong dollar. Hasbro saw particularly strong performance in its Transformers and pre-school units.
Halliburton also beat estimates by 12 cents with adjusted quarterly profit of 49 cents per share, with revenue scoring a slight beat as well. But Halliburton does say it expects the oil sector to remain “challenged”.
SunTrust earned 78 cents per share for its latest quarter, six cents above estimates, with revenue essentially in line. SunTrust was helped by lower expenses, and growth in noninterest income.
William Dudley, president of the New York Federal Reserve Bank, also delivered remarks on Monday in which he said economic performance will be the determining factor on when the central bank will raise rates.
“Whether they raise rates in June, October or December, it doesn’t matter.” Ogg added. This is so because, whenever the central bank does decide to lift rates, it will be because it believes the economy is strong enough to handle it, she also said.
On tap this week:
Earnings: Verizon, United Technologies, Amgen, Yahoo, Travelers, SAP SE, Dupont, Discover Financial, Credit Suisse, Baker Hughes, Canadian Pacific, Lockheed Martin, Gannett, Stryker, Yum Brands, Chipotle Mexican Grill,Cree, Broadcom, VMWare, Kimberly Clark
Earnings: Boeing, Coca-Cola, McDonald’s, AT&T, Facebook,eBay,Petrobras, Qualcomm, F5 Networks, Six Flags, Ryder System,Angie’s List, T. Rowe Price, Abbott Labs, EMC, Bank of NY Mellon, St. Jude Medical, DR Horton, Texas Instruments, Cheesecake Factory,Xilinx,SLM, Raymond James
9:00 am: FHFA home prices
10:00 am: Existing home sales
Earnings: 3M, Amazon.com, Google, Microsoft, Altria, Caterpillar, Dow Chemical, General Motors, Pepsico,Procter and Gamble, Novartis, Eli Lilly, Union Pacific, Hershey, Freeport-McMoRan, KKR, Domino’s Pizza,Johnson Controls, PulteGroup, Dunkin Brands,Raytheon,Starbucks, Capital One, Juniper Networks, Newmont Mining,Southwest Airlines, Pandora
8:30 am: Initial claims
9:45 am: Manufacturing PMI
10:00 am: New home sales
8:30 am: Durable goods
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—CNBC’s Peter Schacknow, Tom DiChristopher and Reuters contributed to this report.