Wall Street rises after Bank of America results and UK reversal

  • Bank of America, BNY benefit from higher interest rates
  • Growth stocks jump as Treasury yields fall
  • Goldman Sachs arrives at a report on major business reform
  • The Dow Jones rose 1.86%, the Standard & Poor’s 500 2.65%, the Nasdaq 3.43%.

NEW YORK (Reuters) – U.S. stocks opened the trading week on Monday with a rally after Britain reversed course over an economic plan, while Bank of America was the latest financial company to report strong quarterly results, adding to optimism about corporate earnings season.

Britain appointed Jeremy Hunt as finance minister, and he promptly dispelled many of the fiscal measures taken by Prime Minister Liz Truss, which have roiled markets in recent weeks.

Bank of America Corp (BAC.N) shares rose 6.06% as the lender’s net interest income was boosted by higher interest rates in the quarter, even though it added $378 million to loan loss reserves to support the soft economy.

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Fellow banker NY Mellon Corp (BK.N) also benefited from higher interest rates, and its shares rose 5.08%.

Overall, higher interest rates boosted lenders’ interest incomes in the third quarter, giving investors hope that the current earnings season may be able to beat a low level of expectations. Earnings growth estimates for the quarter are 3%, according to Refinitiv data, down from 4.5% at the start of the month and 11.1% on July 1.

“In a fragile market like this, any kind of good news in the margins can go a long way,” said Emily Rowland, chief investment strategist at John Hancock Investment Management in Boston.

“There is a better feeling about what is happening in the UK, financial earnings are supported by a number of factors, better net interest margins are one of the key elements, higher rates will be good for banks, so third quarter earnings will probably look a little less bad than feared, On what I put it, it probably isn’t necessarily better than feared.”

The S&P 500 Banking Index (.SPXBK) was up 3.48%, while each of the 11 major S&P 500 sectors was higher.

The Dow Jones Industrial Average rose 550.99 points, or 1.86%, to 30,185.82 points, the S&P 500 increased 94.88 points, or 2.65%, to 3,677.95, and the Nasdaq Composite rose 354.41 points, or 3.43%, to 10,675.80.

US stocks are still mired in a bear market, after suffering through September, a historically difficult month. Analysts said that to improve stock valuations, entering what is traditionally a stronger period for stocks was also supporting Monday’s rally. However, aggressive Fed rate increases could be a stumbling block.

Ratings have fallen sharply but are still above the 20-year average

“Right now, the Fed owns the market, Fed policy is the main driver, and they are implementing the most severe tightening in the shortest amount of time we’ve seen in our generation, and it’s important to remember that Fed policy is working with them,” Rowland said.

Data on manufacturing in the New York region was weaker than expected, adding fuel to expectations that the Fed could be on the horizon.

Shares of Goldman Sachs (GS.N), which will report results on Tuesday, rose 2.24% following reports of a plan to combine investment banking and trading business.

Shares of big growth companies like Apple Inc (AAPL.O), Meta Platforms Inc (META.O), Amazon.com (AMZN.O), and Tesla Inc (TSLA.O), helped lift the S&P 500 growth index (. IGX) increased by 3.42%, the largest daily percentage jump since July 27.

Tesla Inc (TSLA.O), Netflix (NFLX.O) and Johnson & Johnson (JNJ.N) are expected to report their results later in the week.

Volume on US exchanges was 10.65 billion shares, compared to an average of 11.52 billion for the full session over the last 20 trading days.

Advance issues outnumbered decliners on the New York Stock Exchange by 4.79 to 1; On Nasdaq, the ratio was 2.98 to 1 in favor of advanced traders.

S&P 500 made no new 52-week highs and 2 new lows; The Nasdaq recorded 83 new highs and 146 new lows.

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(Reporting by Chuck Mikolajchak) Editing by David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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