Dow jumps 300 points after bank earnings, fears of a rate hike ease
Goldman Sachs announced better-than-expected quarterly results before the opening bell on Monday. Although revenue fell 23% to $11.86 billion, it was $1 billion better than analysts’ estimates thanks to a 55% increase in revenue from fixed income securities, including government and corporate bonds. Profit fell 48% to $2.79 billion due to a drop in industry-wide investment banking activity. Goldman shares soared 3.6%
Bank of America, meanwhile, reported a 5.6% increase in revenue to $22.79 billion from a forecast of $22.67 billion. The bank benefited from rising interest rates, pushing net interest income up 22%. But profit fell 32% to $6.25 billion in the second quarter. The shares fell 1%.
Volatility could be elevated this week as Wall Street turns its attention to corporate earnings and tries to reconcile an array of mixed economic signals. Results come in from Charles Schwab and IBM later Monday, and from Netflix, Johnson & Johnson, Tesla, Twitter and a host of other companies in the coming days.
The global economic outlook worried investors with signs of recession amid rising inflation, putting central banks in the spotlight. The European Central Bank is due to meet on Thursday as the euro zone reels from high inflation, a looming energy crisis and other fallout from Russia’s invasion of Ukraine. The bank is expected to raise interest rates for the first time in 11 years.
Policymakers in the United States signaled another 0.75 percentage point interest rate hike ahead of Federal Reserve Board meetings on July 26-27.