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Wall Street rallies after BofA results, UK reversal

Economy Oct 17, 2022 06:26PM ET
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© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 7, 2022. REUTERS/Brendan McDermid/File Photo
 
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By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks kicked off the trading week on Monday with a rally after Britain reversed course on an economic plan, while Bank of America was the latest financial company to post solid quarterly results, which lifted optimism about the corporate earnings season.

Britain named Jeremy Hunt finance minister, and he immediately dispelled many of Prime Minister Liz Truss' fiscal measures, which had unnerved markets in recent weeks.

Bank of America Corp (NYSE:BAC) shares surged 6.06% as the lender's net interest income was buoyed by rising interest rates in the quarter, even though it added $378 million to its loan-loss reserves to buttress against a softening economy.

Fellow financial Bank of NY Mellon (NYSE:BK) Corp also benefited from higher interest rates, and its shares climbed 5.08%.

Overall, higher rates boosted interest incomes for lenders in the third quarter, giving investors hope the current earnings season will be able to hurdle a lowered bar of expectations. The earnings growth estimate for the quarter is 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 type of good news in the margin can go a long way," said Emily Roland, co-chief investment strategist at John Hancock Investment Management in Boston.

"There is better sentiment around what is happening in the UK, financials earnings are being supported by a number of factors, better net interest margins are one key element, higher rates are going to be good for the banks so Q3 earnings maybe are looking a little less bad than feared, I would put it, maybe not necessarily better than feared."

The S&P 500 banks index was up 3.48%, while each of the 11 major S&P 500 sector were higher.

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

U.S. equities remain mired in a bear market, after struggling through September, historically a tough month. Analysts said to better stock valuations entering what is traditionally a stronger period for stocks were also supporting Monday's rally. Aggressive Federal Reserve interest rate hikes could be a stumbling block though.

"Right now the Fed owns the market, Fed policy is the key driver, they are implementing the most aggressive tightening in the shortest amount of time that we have seen in our generation and it is important to remember that Fed policy, it works with a lag," said Roland.

Data on manufacturing in the New York region was weaker than expected, adding fuel to expectations a pivot by the Fed may be on the horizon.

Shares of Goldman Sachs (NYSE:GS), which will post results on Tuesday, advanced 2.24% following reports of a plan to combine its investment banking and trading businesses.

Major megacap growth stocks like Apple Inc (NASDAQ:AAPL), Meta Platforms Inc, Amazon.com (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) Inc all rallied, helping to lift the S&P 500 growth index by 3.42%, its biggest daily percentage jump since July 27.

Tesla Inc, Netflix (NASDAQ:NFLX) and Johnson & Johnson (NYSE:JNJ) are among companies expected to report results later in the week.

Volume on U.S. exchanges was 10.65 billion shares, compared with the 11.52 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 4.79-to-1 ratio; on Nasdaq, a 2.98-to-1 ratio favored advancers.

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

Wall Street rallies after BofA results, UK reversal
 

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Comments (30)
Jimmy McGill
Jimmy McGill Oct 18, 2022 9:15AM ET
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Oil pulling back, that market sees demand slump. Don't get trapped by yesterday's adjusted EPS game here. These results are dismal, but inflation pumps revenue for a while.
Jimmy McGill
Jimmy McGill Oct 18, 2022 9:10AM ET
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BofA losing all credibility with these statements. Deep recession is already started
nils Hullmann
nils Hullmann Oct 18, 2022 6:38AM ET
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the midterm rally creepy joe ordered arrived just in time
James Long
FauxNews Oct 18, 2022 6:38AM ET
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Joe has nothing to do with it. How can he be the worst economic president ever yet so smart and powerful that suddenly he can make the market go up jyst before elections ?
Brad Self
Brad Self Oct 17, 2022 10:03PM ET
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who else bought puts for 1 month out?
Kerry Ditto
Kerry Ditto Oct 17, 2022 5:42PM ET
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stock market acts like a zombie. up on day, down a few days. then up an down in zombie walking mode.
Richard Saunders
Richard Saunders Oct 17, 2022 5:40PM ET
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CEO of Suisse resigned hours ago. Very, very interesting. Buy gold, silver, copper people.
Chad Richer Than You
Chad Richer Than You Oct 17, 2022 3:12PM ET
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Truss is hot
Ma Lu
Ma Lu Oct 17, 2022 3:05PM ET
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Tomorrow the answer will follow and everything will point down caused by big tech sell-off.
Yellow Owl
Mystic_Owl Oct 17, 2022 12:55PM ET
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The truth is there is no discernible reason for any small intraday moves. And yet, the news makers have the jobs of calling it loud why something happened. What a scam!
Adrian White
Adrian White Oct 17, 2022 12:55PM ET
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It's not a "scam" for them to make a call. It's simply an opinion. Nobody forces you to listen or act on it. If it was your financial manager giving you those reasons, while taking opposite positions from you, however, then you could say it was a scam.
Eric Moon
Eric Moon Oct 17, 2022 12:28PM ET
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false numbers, overall light shares in the market. manipulated numbers and these gangsters are still running the machines.
 
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