Smaller company stocks rose even more, sending the Russell 2000 index 3.5 per cent higher.

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Stocks had dropped roughly 20 per cent this year on worries about rising interest rates and high inflation, which puts an even brighter spotlight than usual on how much profit companies are making. If earnings hold up, it would provide a major support for markets. But if CEOs warn about troubles ahead, another tumble may be on the way.

“What we’re all enjoying today is a bit of a relief rally,” said Keith Buchanan, portfolio manager at Globalt Investments. “The tone with the latest earnings from the large banks has not been increasingly negative and investor sentiment is at record lows, so it doesn’t take very much to have an exciting, upside day.”

More types of companies are reporting how much they earned during the spring, broadening out from the banks that dominated the earliest part of the reporting season.

Toy company Hasbro rose 0.7 per cent after it reported stronger profit than analysts expected. Oilfield services provider Halliburton added 2.1 per cent after its profit and revenue topped forecasts. Netflix jumped 8 per cent in after-hours trading after the company reported better-than expected results and a smaller subscriber loss than analysts had feared.

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Twitter rose 2.8 per cent after a court in Delaware agreed to quickly schedule a lawsuit that could force billionaire Elon Musk to make good on his agreement to buy the company.

Bitcoin continued to march higher, rising 4.2 per cent over the past 24 hours to $US23,335.65 on Bitstamp at 9.46am AEST.

IBM, though, fell 5.2 per cent despite reporting stronger revenue and earnings than expected. The company’s profit margins fell short of some analysts’ expectations, and concerns are rising about the effect of the dollar’s recent strength against other currencies. While a stronger dollar helps limit inflation at home, it can also undercut the value of sales made abroad by US companies.

The dollar’s value eased a bit against other currencies on Tuesday, which allayed some fears for the market. So too, counterintuitively, may have a report that showed an extreme level of pessimism among investors. The Australian dollar was 1.3 per cent higher at 69.01 US cents at 6.49am AEST.

Expectations for economic growth and profits have plunged, according to the latest results from Bank of America’s monthly survey of global fund managers. That has them sitting on their highest cash levels since 2001 and their lowest allocations to stocks since 2008.

“Full capitulation” is how Michael Hartnett, chief investment strategist, called it in a BofA Global Research report. Contrarian investors see such dire levels of pessimism as an encouraging signal, which could presage better times ahead if everyone who was going to sell has already.

With AP

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