Stocks advance as earnings return to center stage

Market sentiment recovered Wednesday, lifted by a slate of positive earnings from some of Europe’s biggest companies that may signal fresh impetus for a stock rally showing signs of fatigue.

Futures on the S&P 500 added 0.3%, pointing to a potential rebound on Wall Street after the gauge clocked a third day of losses on Tuesday to close near a two-month low. Nasdaq 100 contracts edged higher. Treasury yields retreated from a 2024 peak, and a gauge of the dollar snapped five days of gains that took it to a five-month high.

Investor focus is turning to corporate earnings as the next catalyst for a rally that hit a wall this week as traders pared bets on Federal Reserve interest rate cuts. Shares of companies tied to the business cycle are among those poised to gain as growth rebounds, according to Leonardo Pellandini, equity strategist at Bank Julius Baer.

“We would actually advise to use such an opportunity to gradually increase exposure to cyclicals in the anticipation of the new economic cycle starting to unfold in second half of this year,” he said.

Barclays Plc strategists also recommended loading up on cheaper assets during market downturns, in anticipation of an economic recovery that could boost profits.

Stocks have come under pressure this week amid disappointed hopes for imminent policy easing. After starting the year by pricing in as many as six rate cuts, traders are now betting on two or less. Fed Chair Jerome Powell said Tuesday it would likely take longer to have confidence that inflation is headed toward the central bank’s target.

Meanwhile, tensions in the Middle East continue to simmer. Israel is weighing a response to what was the first attack on the Jewish state from Iranian soil. Saudi Arabia and the United Arab Emirates called for maximum “self-restraint” to spare the region “from the dangers of war and its dire consequences,” in an unusually frank joint statement Wednesday.

European natural gas edged higher for a fifth day. Oil dipped, with Brent crude falling below $90 a barrel, as traders wait to see how Israel would respond to Iran’s weekend attack. Gold held near a record high.

Corporate Highlights:

—Rio Tinto Plc rose after saying elevated steel exports by China will continue support demand for the raw material.

—Alcoa Corp. shares gained after Bloomberg reported that President Joe Biden will propose higher tariffs on Chinese steel and aluminum during a visit to Pittsburgh, Pennsylvania.

—Volvo AB rose after it reported robust returns for the first quarter by charging higher prices.

—United Airlines Holdings Inc. shares rose after the carrier forecast better-than-expected profit this quarter.

—ASML Holding NV plunged more than 6% after missing estimates for first-quarter orders.

—J.B. Hunt Transport Services, Inc. shares fell after the transportation company posted first-quarter earnings and revenue that fell short of expectations.

—Autodesk Inc. shares dropped in premarket trading after the software company said it won’t file its annual report within the 15-day extension period as it continues an investigation into free cash flow and accounting practices.

Key events this week:

—Fed issues its Beige Book, Wednesday

—Cleveland Fed President Loretta Mester speaks, Wednesday

—Fed Governor Michelle Bowman speaks, Wednesday

—BOE Governor Andrew Bailey speaks, Wednesday

—Taiwan Semiconductor earnings, Thursday

—US Conf. Board leading index, existing home sales, initial jobless claims, Thursday

—Fed Governor Michelle Bowman speaks, Thursday

—New York Fed President John Williams speaks, Thursday

—Atlanta Fed President Raphael Bostic speaks, Thursday

—BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday

—Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

—S&P 500 futures rose 0.3% as of 8:14 a.m. New York time

—Nasdaq 100 futures rose 0.2%

—Futures on the Dow Jones Industrial Average rose 0.2%

—The Stoxx Europe 600 rose 0.6%

—The MSCI World index was little changed

Currencies

—The Bloomberg Dollar Spot Index fell 0.2%

—The euro rose 0.2% to $1.0639

—The British pound rose 0.2% to $1.2457

—The Japanese yen was little changed at 154.66 per dollar

Cryptocurrencies

—Bitcoin fell 0.5% to $62,704.51

—Ether fell 1% to $3,039.02

Bonds

—The yield on 10-year Treasuries declined two basis points to 4.65%

—Germany’s 10-year yield was little changed at 2.48%

—Britain’s 10-year yield was little changed at 4.30%

Commodities

—West Texas Intermediate crude fell 0.5% to $84.91 a barrel

—Spot gold rose 0.1% to $2,385.63 an ounce