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Stock Markets Bounce After a Week of Whiplash Stock Markets Bounce After a Week of Whiplash
(about 3 hours later)
Stock markets shot upward on Monday, their latest move in a series of big swings, after several big financial institutions reported earnings that beat expectations, and Britain’s new chancellor announced a reversal of Prime Minister Liz Truss’s tax plan. Stock markets shot upward on Monday, the latest in a series of wild swings, after several big financial institutions reported earnings that beat expectations.
The recovery Monday marked another large move in the stock market, where big day-to-day fluctuations have become more common. The S&P 500 rose 2.6 percent by midday trading, reversing a fall of more than 2 percent on Friday, which itself came after a rise of more than 2 percent on Thursday. The benchmark index has recorded five days of moves of over 2 percent this month, with Monday on track to be the sixth, versus only two in September. Large day-to-day fluctuations have become more common in the stock market this month. The S&P 500 closed with a gain of 2.7 percent , reversing a fall of more than 2 percent on Friday, which itself came after a rise of more than 2 percent on Thursday. All 11 sectors of the S&P 500, which include groupings like technology, energy and real estate, were also up. The benchmark index has recorded six days of moves of over 2 percent this monthversus only two in September.
The S&P 500 remains down more than 22 percent since the beginning of the year.The S&P 500 remains down more than 22 percent since the beginning of the year.
The big shift in the markets came after Bank of America, the nation’s second-largest bank, reported quarterly earnings that beat expectations. The bank pointed to continued strength in consumer spending, echoing the earnings of other big banks at the end of last week. Shares of Bank of America stock rose 5.4 percent by midday. Charles Schwab and the Bank of New York Mellon also reported better-than-expected earnings. The big shift in the markets came after Bank of America, the nation’s second-largest bank, reported quarterly earnings that beat expectations along with news from Britain that Prime Minister Liz Truss’s tax plan, which had rattled markets, would be reversed. Bank of America pointed to continued strength in consumer spending, echoing the earnings of other big banks at the end of last week. Shares of Bank of America stock closed with gains of 6 percent . Charles Schwab and the Bank of New York Mellon also reported better-than-expected earnings.
Investors are keeping a close eye on companies reporting earnings this quarter to gauge whether big corporations are beginning to feel the effects of an economic downturn. This week, industry bellwethers like American Airlines, Goldman Sachs and Procter & Gamble are set to open their books, providing updates and forecasts for investors anxious about the path of the economy. Investors are keeping a close eye on companies reporting earnings this quarter to gauge whether big corporations are beginning to feel the effects of an economic downturn. This week, companies including American Airlines, Goldman Sachs and Procter & Gamble are set to open their books, providing updates and forecasts for investors anxious about the path of the economy.
Last week, data showed that inflation in the United States did not cool down as much as economists had expected, a sign that the Federal Reserve would likely announce another substantial interest rate increase at its next meeting in November, which could restrict economic growth. That, paired with a survey that showed an increase in consumers’ expectations for future inflation, had cast a shadow over markets. The big gyrations in stocks lately aren’t always about changes in fundamentals, like a strong earnings report, said Kristy Akullian, a senior iShares strategist at BlackRock. There’s a “technical element” too that’s driving the bigger-than-usual moves, she said.
Yields on U.S. government bonds, a benchmark for borrowing costs, fell. The yield on the two-year note fell to 4.4 percent after rising to its highest level since 2007 on Friday. The yield on the 10-year note fell to 3.9 percent. Yields run inversely to prices. “We’re actually seeing that whenever the market rallies a little bit, it tends to rally a lot.”
Elsewhere, London’s FTSE 100 closed with gains of 0.9 percent, the British pound strengthened and Britain’s government bond yields plunged after Jeremy Hunt, the newly installed chancellor of the Exchequer, announced on Monday more reversals of Ms. Truss’s plan for tax cuts funded by additional borrowing. In other markets, the price of West Texas Intermediate crude oil, the U.S. benchmark, fell 0.3 percent, to $85 a barrel. The price of Brent crude, the global benchmark, also fell 0.1 percent, to almost $92 a barrel.
London’s FTSE 100 closed with gains of 0.9 percent, the British pound strengthened and Britain’s government bond yields plunged after Jeremy Hunt, the newly installed chancellor of the Exchequer, announced on Monday more reversals of Ms. Truss’s plan for tax cuts funded by additional borrowing.
“At a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut,” Mr. Hunt said.“At a time when markets are rightly demanding commitments to sustainable public finances, it is not right to borrow to fund this tax cut,” Mr. Hunt said.
Last week, data showed that inflation in the United States did not cool down as much as economists had expected, a sign that the Federal Reserve would likely announce another substantial interest rate increase at its next meeting in November. That prospect, paired with a survey that showed an increase in consumers’ expectations for future inflation, had cast a shadow over markets.
“We think that this volatility is going to persist,” Ms. Akullian said. “Most likely until the end of the year and probably even past that until we have a little bit more of a concrete sense for what the Fed is going to be able to do.”