US stocks rose on Tuesday, extending gains from the previous session after Goldman Sachs became the latest bank to report better-than-expected quarterly results.
The benchmark S&P 500 index rose 1.3 percent through the afternoon session in New York, while the tech-heavy Nasdaq Composite was up 1.2 percent. Europe’s regional Stoxx 600 and Hong Kong’s Hang Seng closed down 0.3 percent and 1.8 percent, respectively.
That progress in stock markets followed a rally on Monday that saw the S&P 500 finish 2.6 percent higher – helped by better-than-expected third-quarter results from Bank of America. BofA credited its earnings to “resilient” US consumers.
Investors have been monitoring recent company reports for signs of a drag from high inflation and rising borrowing costs.
The Federal Reserve has led the charge this year for aggressively tightening monetary policy to curb rapid price growth — it has raised interest rates by an extra large 0.75 percentage points at each of its last three meetings, to a target range of 3 to 3.25 percent. In recent months, concerns have mounted that the Fed and its peers will turn policy into a protracted slowdown.
But the early stages of the recent US corporate earnings season have helped lift sentiment. Goldman shares rose nearly 3 percent Tuesday after the bank reported third-quarter net income of $3.1 billion, down from $5.4 billion a year earlier but above analyst estimates $2.9 billion.
The strong start to the week for equity markets was also helped by the UK government’s decision on Monday to scrap most of last month’s ‘mini’ budget measures that had spooked markets and sparked a sell-off in pension fund assets.
“UK news has again had a major impact on global markets in the last 24 hours after the UK government officially announced one of the biggest reversals in political history and dumped most of the remaining mini-budget,” wrote Jim Reid, strategist at the Deutsche Bank.
Some analysts and investors see the recent price gains as temporary. A FTSE index of global stocks has fallen 25 percent this year and last month ended its longest run of quarterly losses since 2008.
“Sentiment is really depressed,” said Kasper Elmgreen, equity chief at Amundi, citing a BofA survey released Tuesday that showed 72 percent of fund managers expect a weaker economy a year from now.
Westminster’s U-turn on its tax proposals and BofA results had a positive impact on markets on Monday. But Elmgreen said, “We don’t see much that renews us, [long-term] Trust. It’s natural that we have this surge of optimism and strong days in a really challenging macro outlook.”
He added: “We’re entering a quarter of reckoning: This could be the quarter where earnings have to give way.”
“Major central banks are likely to continue to hike interest rates through the first quarter of 2023, economic growth is likely to decelerate further into the new year, and global financial markets are vulnerable to stress as monetary policy tightens further,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
In government bond markets, the yield on the benchmark 10-year UK gilt slipped 0.02 percentage point to 3.93% as its price edged up after a rally in the previous session. The longer-term 30-year yield fell 0.02 percentage point to 4.29 percent. In the US, the benchmark 10-year yield was roughly flat at 4.02 percent.
The pound fell 0.3 percent against the dollar to $1.131. Elsewhere, the yen traded at around 149 yen against the greenback, hitting a 32-year low.
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