U.S. stocks rallied on Monday, tracking a relief rally that swept through Asian and European markets, after centrist candidate and market favorite Emmanuel Macron won the first round of the French presidential election. Pro-EU Macron is expected to beat right-wing rival Marine Le Pen in a deciding vote on May 7 according to polls, which were mostly right about the first-round results. “The biggest thing was you got confirmation that polling can actually be somewhat accurate, so you can actually make a prediction on probabilities of events and you can allocate assets and you don’t get this big surprise,” said Thomas Hainlin, global investment strategist at Ascent Private Capital Management in Minneapolis.
The moves across markets point to an unwinding of bets taken in the past few days as traders had turned defensive ahead of the French election. Indexes were near their session highs after the Wall Street Journal reported tax cuts are more important for the White House than reducing the deficit, and President Trump looks to cut the corporate tax rate to 15 percent from 35 percent. Effective tax rates vary widely and can be as low as zero. The Dow Jones Industrial Average rose 230.39 points, or 1.12 percent, to 20,778.15, the S&P 500 gained 26.95 points, or 1.15 percent, to 2,375.64 and the Nasdaq Composite added 77.50 points, or 1.31 percent, to 5,988.02.
MSCI’s gauge of stocks across the globe gained 1.57 percent to 453.56 after touching a record high of 453.7. U.S. investors are also gearing up for the busiest earnings week in at least a decade, with over 190 S&P 500 members, including heavyweights Alphabet and Microsoft due to report results this week. “Earnings are coming in better than expected and this is for a quarter where estimates were pretty tight.
We didn’t see much pullback with estimates in the course of the quarter, so expectations were high and we’re beating them,” said Art Hogan, chief market strategist at Wunderlich Securities in New York. Of the 100 S&P 500 companies that have reported results so far, 77 percent have beaten profit expectations, according to Thomson Reuters I/B/E/S. This has helped lift the blended profit growth estimates to 11 percent from 10 percent at the start of the earnings season. Medical device maker C R Bard jumped almost 20 percent to $302.93 after U.S. medical equipment supplier Becton Dickinson said it would buy Bard for $24 billion.
Defensive trades suffered as traders embraced risk. Spot gold dropped 0.7 percent to $1,275.27 an ounce. The safe-haven Japanese yen weakened 0.63 percent versus the greenback at 109.80 per dollar. The CBOE Volatility index touched its lowest since March 17. Advancing issues outnumbered declining ones on the NYSE by a 2.52-to-1 ratio; on Nasdaq, a 2.68-to-1 ratio favored advancers. The S&P 500 posted 72 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 187 new highs and 38 new lows.