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U.S. stocks rose early Monday as Goldman Sachs (GS) reported earnings and revenue that blew away Wall Street estimates and investors readied for earnings season to ramp up.
The S&P 500 gained 0.9%, while the Dow Jones Industrial Average jumped 350 points, or 1.1%. The tech-heavy Nasdaq Composite climbed 1%.
Bank of America (BAC) and Goldman Sachs rounded out bank results ahead of the trading session Monday. Goldman Sachs reported a smaller-than-expected 48% drop in second-quarter profit, as losses were partially offset by strength in its fixed income trading business. Meanwhile, Bank of America saw its profit fall 34%, dragged down by a decline in investment banking revenue amid slower dealmaking activity.
The results come after the financial sector logged its best intraday rally since May on Friday, buoyed by a notable second-quarter beat from Citigroup (C), a day after traders assessed disappointing financials from JPMorgan (JPM) and Morgan Stanley (MS).
JPMorgan chief Jamie Dimon cautioned on Wednesday in a post-earnings call that risks to the U.S. economy appear “nearer than they were before” and said the outlook will depend on “the effectiveness of quantitative tightening, and defective, volatile markets.”
Similar commentary is expected from leaders across Corporate America this week as more companies reveal how their businesses held up during a volatile last quarter. Not only are numbers projected to reflect milder profits, traders are bracing for potential downward guidance revisions as companies outline the impact of surging prices, quantitative tightening, and war in Ukraine on their business prospects.
“The most important indication for the economy over the next few weeks will be earnings releases as companies report,” Gargi Chaudhuri, Head of iShares Investment Strategy, Americas at BlackRock said in a note.
“We will be watching to see whether companies are still able to keep pushing higher prices to their consumers, and which sectors are significantly revising down their earnings forecast for the future,” she said. “We will also be watching to see how much recession risks will be noted in feature in earnings calls.”
Over 70 companies are scheduled to release results this week. Big tech earnings are set to trickle in, starting with Netflix (NFLX) after market close on Tuesday, Tesla (TSLA) after the bell on Wednesday, and Twitter (TWTR) before the start of trading Friday.
Monday’s moves in markets build on a rally Friday that saw stocks close sharply higher as Wall Street attempted to shake off losses from a turbulent week wrought by June’s shock CPI print. Still, all three major indexes closed the week lower.
Consumer prices accelerated 9.1% year-over-year in June, the fastest annual pace since November 1981, according to the Bureau of Labor Statistics’ latest consumer price index (CPI). The reading is expected to guide Federal Reserve policymakers as the prepare for their next meeting July 26-27, with expectations for another 75 basis point hike on deck and some speculation of a full percentage point increase.
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