US stocks rose as Wall Street banks posted upbeat results while speculation the Federal Reserve will take a more measured approach to policy tightening eased fears of recession.
The S&P 500 gained for a second day, with all but three of the 11 major industry groups rising. Energy stocks rallied as oil climbed back above $100 a barrel. Goldman Sachs Group Inc. shares surged after the bank reported second-quarter results that were better than expected in nearly every area. Bank of America Corp. reported higher net interest income that it said is likely to increase more this quarter.
Treasuries fell across the board as investors shunned haven assets, with the long-end of the curve underperforming and the 10-year yield climbing back to 3%. The dollar dropped against all of its Group-of-10 peers. On the flip side, Bitcoin rallied back above $22,000.
The S&P 500 index is more than 5% above June’s closing low following Friday’s strong rally on renewed hopes that inflation — and Fed rate hikes — may be close to peaking. Data last week showing a greater decline in US consumers’ long-term inflation expectations helped squashed talk of a 100 basis-point hike in July, while strong retail sales underscored a resilient economy.
“You have to be very careful in how you’re allocating assets and allocating dollars in this market — but you had a couple of really good numbers this morning from Goldman and Bank of America, on the back of good retail sales,” said Chuck Cumello, president and chief executive officer of Essex Financial Services. “And the key thing in the US economy is the consumer, and if the consumer is out there spending — and yes, we can argue that yes, they were spending but inflation eroded that purchasing power, no doubt about it — but the bottom line is people are out spending.”
A pressure point for markets remains gas supply to Europe amid a standoff with Russia over its invasion of Ukraine, with the Nord Stream 1 pipeline scheduled to reopen Thursday following maintenance. Gazprom PJSC declared force majeure on several European natural-gas buyers, a move that may signal it intends to keep supplies capped.
Gains in stock markets may prove to be short-lived as inflation pressures remain high and a recession seems increasingly likely, according to strategists at Morgan Stanley and Goldman Sachs Group Inc.
Elsewhere in markets, West Texas Intermediate crude climbed above $100 a barrel after the Saudis declined to make any promises regarding future output increases, and copper extended its recovery from last week’s slump. Bitcoin rallied, trading above $22,000 for the first time since early June.
Key events to watch this week:
- Earnings this week include Tesla
- US Treasury Secretary Janet Yellen visits South Korea. Tuesday
- Reserve Bank of Australia releases July minutes. Tuesday
- UK Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey speak at event. Tuesday
- Bloomberg Crypto Summit in New York. Tuesday
- Bank of Japan, European Central Bank rate decisions. Thursday
- Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7% as of 12:38 p.m. New York time
- The Nasdaq 100 rose 1.3%
- The Dow Jones Industrial Average rose 0.5%
- The MSCI World index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.6%
- The euro rose 0.9% to $1.0169
- The British pound rose 1.1% to $1.1984
- The Japanese yen rose 0.3% to 138.14 per dollar
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 3.00%
- Germany’s 10-year yield advanced eight basis points to 1.22%
- Britain’s 10-year yield advanced seven basis points to 2.16%
Commodities
- West Texas Intermediate crude rose 4.1% to $101.56 a barrel
- Gold futures rose 0.4% to $1,709.60 an ounce
