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Stocks rise on Wall Street after bank earnings reports

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NEW YORK — Wall Street is strengthening Monday to kick off a week full of updates on the two things that set stock prices: corporate earnings and the direction interest rates are headed.

The S&P 500 was up 0.7% in early trading, on pace with another gain after breaking a five-day losing streak late last week. Goldman Sachs helped lead financial company stocks to some of the biggest gains after posting better-than-expected spring earnings.

The Dow Jones Industrial Average was up 200 points, or 0.6%, at 31,488 as of 10:05 a.m. EST, and the Nasdaq composite was up 1.3%.

Markets have mostly been falling for weeks on fears that the Federal Reserve and other central banks around the world are putting the brakes on the economy too hard in hopes of bringing down high inflation. If they are too aggressive in their interest rate hikes, they could cause a recession.

But some on Wall Street see signs of at least temporary optimism. Oil prices have moved off their highs, although they rose around 4% on Monday, and some traders are again saying inflation could peak following the latest report which showed another four-point high. decades. A key report last week showed that inflation expectations among households were easing, which could prevent a vicious circle from taking root.

Expectations about how aggressively the Federal Reserve will raise interest rates at its meeting next week have diminished. Traders are now betting on around a one in three chance of a monstrous full percentage point rise, with the majority favoring a 0.75 percentage point rise. As late as Thursday, the big bet was on a full point hike.

On the other side of the Atlantic, investors expect the European Central Bank to raise interest rates for the first time in 11 years on Thursday to fight inflation. Many investors expect a 0.25 percentage point increase, “but more is not unthinkable,” the economists wrote in a BofA Global Research report.

Interest rates are one of the two main levers that set stock prices. The other is corporate earnings, which are at risk given high inflation and slowdowns in parts of the economy.

Goldman Sachs rebounded 4.1% after reporting better earnings and revenue for the last quarter than analysts had expected. Synchrony Financial rose 2.5% after also beating profit and revenue forecasts. Bank of America gained 1.4% even though it fell short of analysts’ earnings expectations. Despite all the worries about a recession, Bank of America said customer spending and deposits remained strong.

IBM is set to release its results after the close of trading. Johnson & Johnson, American Airlines and Netflix are all expected to follow later in the week. Nearly 15% of S&P 500 companies are expected to report earnings this week.

In overseas markets, Hong Kong’s Hang Seng Index jumped 2.7% after Chinese media reported that some stalled property projects had resumed construction after buyers threatened to halt mortgage payments. The Shanghai Composite Index gained 1.6%.

Equities also rose across much of the rest of Asia and Europe, with the German DAX posting a return of 0.9%.

AP Business Writer Elaine Kurtenbach contributed.