4.08pm: Bank of America helps US market post strong gains
US markets continued their roller coaster ride, this time upwards, with all three major indices posting major gains by the close.
The Dow Jones Industrial Average soared 551 points, or 1.86%, to 30,186, the S&P 500 advanced 95 points, or 2.65% to 3,678, and the Nasdaq Composite jumped by 354 points, or 3.43%, to 10,676.
Earnings took centre stage as the quarter three reporting season gathered pace with more index heavyweights reporting this week.
Bank of America (BAC) was the penultimate of the country’s six largest banks by assets to report earnings Monday morning.
Shares rose 6.32% after the company revealed trading revenues that beat Wall Street estimates, although like its peers the bank saw profits slump during the period as it set aside funds for uncollected loan payments in the event of increased defaults if the economy enters a recession.
Investors also took heart from events across the pond as the UK government reversed nearly all its tax cut plans calming bond and currency markets.
12.05pm: Dow Jones back above 30,000
US indices remained in the green midday, as investors await more than 350 quarterly earnings reports to be released this week, up from just over 50 the week before.
At midday, the S&P 500 was up by 2.7% at 3,679, while the Nasdaq Composite was up by 3.5% at 10,680 and the Dow Jones rose by 1.9% to 30,182 points.
Chris Beauchamp, chief market analyst at online trading platform IG, said the mood in the markets is more optimistic.
“The Dow finds itself back above 30,000 on hopes that perhaps the outlook for US consumers is not as bad as previously feared. It looks like the general bearishness has run its course for the time being, and if more earnings follow Bank of America there might be another short-term, but nonetheless impressive, rally, until the Fed arrives to spoil the party,” Beauchamp wrote in a report.
Industry giants including Johnson & Johnson, Lockheed Martin, Nokia, Netflix, and Tesla are posting quarterly earnings reports this week, along with grocery chain Albertsons, which was purchased by Kroger last week in a US$24.6 billion transaction.
The major movers at midday saw Argentinean ecommerce company MercadoLibre up over 12%, while Pinduoduo, Atlassian, Okta and Dish Network were all up over 8%.
On the downside, Fox Corp class A and B stocks both hit 52 week lows, down by 6.5% each, and savings and loan company Charles Schwab fell by 3.7%, despite beating analyst estimates on 3Q earnings and revenue.
9.35am: Dow Jones adds 500 points plus at the open
US stocks have started the week on a positive note as earnings season ramps up, with major corporations including Netflix Inc and Tesla Inc set to report their latest quarterly figures over the next few days.
Just after the opening bell, the Dow Jones Industrial Average had added 528 points or 1.8% at 30,162 points, the S&P 500 was up 77 points or 2.1% at 3,660 points, and the Nasdaq Composite was up 279 points or 2.7% at 10,600 points.
The latest big bank to report its quarterly earnings, Bank of America Corporation, was up about 4.7% at the open after posting a revenue beat driven by higher rates and solid loan growth along with a decline in profit.
Forex.com market analyst Joshua Warner noted that markets were optimistically higher as investors prepared for earnings season to get into full swing.
“Wall Street believes the S&P 500 will deliver earnings growth of around 3.6% from last year in the third quarter, with the deteriorating economic outlook having curtailed expectations that had hoped for much stronger earnings growth of over 11% just a few months ago,” he wrote in a note.
“Markets will find out how rampant inflation and rising interest rates are impacting profits and how the outlook is faring as we approach the end of 2022 and start to turn our attention toward what is currently shaping up to be an even tougher 2023.”
6.30am: Reprieve after volatile week?
US stocks are expected to open higher after last week’s volatile trading as attention shifts to the quarterly earnings season with more big banks due to report this week.
Prevailing concerns about the path for more interest rate hikes and continuing inflationary pressures, however, are expected to keep trading cautious.
Futures for the Dow Jones Industrial Average were up 1.2% in pre-market trading, while those for the S&P 500 were 1.4% higher, and contracts for the Nasdaq-100 added 1.5%.
After a mixed bunch of bank earnings last week, with optimism from strong results at JPMorgan Chase and Wells Fargo partly offset by disappointing figures from Morgan Stanley (NYSE:MS), attention this week turns to earnings from Bank of America and Goldman Sachs (NYSE:GS).
James Hughes chief market analyst at scopemarkets.com noted that the earnings are "expected to continue to paint an upbeat picture with Q3’s from Bank of America tipped to show modest year-on-year revenue improvement".
Bank of America is due to publish earnings today while Goldman Sachs (NYSE:GS) is scheduled to release its results on Tuesday. Netflix and Tesla are also due to release their earnings this week.
Meanwhile, Hughes added: “Economic data out of the US is looking quiet today, although a sharp decline in the NY Empire State manufacturing Index due shortly before the opening bell could raise questions over the Federal Reserve’s unwavering stance on rate hikes."
Data out last week showed that US CPI inflation remains stubbornly high at levels around 40-year highs while core inflation, which strips out more volatile elements, picked up. Taken together the data is expected to keep the pressure on US rate-setters to continue hiking interest rates even if that means that economic activity may falter.
“That hotter-than-expected September inflation print is certainly taking a toll, but as monetary policy starts to take a toll on the secondary data points, challenges will mount,” noted Hughes.
The Federal Reserve has hiked interest rates by 75 basis points three times this year. Investors expect another such hike at the Fed’s next meeting at the start of November as rate-setters attempt to cool inflation. These expectations have been pushing up US Treasury yields and that pressure is likely to continue.
“There are also some short-dated T-bill auctions due today and again yields here will be impacted by expectations of where the market goes next, in turn bumping up borrowing costs for the wider US economy,” Hughes concluded.
Contact the author at jon.hopkins@proactiveinvestors.com