Global stocks fall back despite latest earnings-driven rally on Wall Street

World equities retreated on Wednesday following a session in which U.S. stocks reached all-time highs, driven by expectations of strong corporate earnings. The pullback in Asia and Europe came despite the previous day's rally in American markets, which saw key indices set new records.

In early European trading, the CAC 40 in Paris lost 0.4% to 7,836.77, while Britain's FTSE 100 shed 0.1% to 10,532.87. Germany's DAX index fell 0.4% to 25,338.97. Asian markets also declined, with Japan's Nikkei 225 dropping 0.9% to 70,035.71 and South Korea's Kospi falling 2% to 6,803.90. Hong Kong's Hang Seng index decreased 0.6% to 24,130.50, while Taiwan's Taiex remained nearly unchanged. Shanghai exchanges were shut for a national holiday. The S&P/ASX 200 in Australia gave up early progress to finish 0.1% lower at 8,727.70.

The U.S. market surge occurred on Tuesday, with the S&P 500 climbing 0.6% to a record 7,818.93, surpassing its previous all-time high set in August. The index has risen 23% since its late-March trough, despite concerns regarding the war with Iran, high inflation, and bond market pressures. The Dow Jones Industrial Average added 0.5% to 51,521.28, and the Nasdaq composite gained 0.4% to close at a record 27,599.79.

Ng Jing Wen of Mizuho Bank attributed the rally to confidence that corporate earnings, particularly in technology and artificial intelligence sectors, can withstand elevated energy costs and restrictive interest rates. She noted that investors continue to prioritize earnings momentum over near-term inflation risks.

Strong corporate results provided key support for the market. Lamb Weston reported that its latest quarterly profit and revenue exceeded projections and analyst expectations, sending its stock up 7.5%. Constellation Energy also led gains after announcing a long-term electricity supply deal with Google.

Analysts expect companies in the S&P 500 to deliver nearly 30% growth in earnings per share for the July through September quarter, according to FactSet data. If accurate, this would mark the third consecutive quarter of growth exceeding 25%. Delta Air Lines is scheduled to report its third-quarter results on Friday, with major banks expected to follow next week.

However, critics point to potential bubble dynamics in AI stocks following their significant surge. Nvidia's share price has jumped 28.3% this year, roughly double the gain of the broader market. Bond yields offered some relief on Tuesday as the 10-year Treasury yield eased to 5.28% from 5.31%, falling after oil prices steadied.

Crude prices rebounded early Wednesday, with Brent crude rising 0.7% to $101.26 per barrel, though this remains below the nearly $110 level seen a few weeks ago. U.S. benchmark crude increased 0.3% to $89.66 per barrel. In currency markets, the U.S. dollar fell to 158.13 Japanese yen from 158.10 yen, while the euro slipped to $1.1197 from $1.1260.