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Easing rate-hike bets, bank earnings lift Wall Street

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U.S. stock indexes rose on Monday after earnings from big banks beat expectations for profit, extending last week’s positive momentum amid easing bets of a super-sized interest-rate hike by the Federal Reserve.

Goldman Sachs Group Inc gained 2.5% as it reported a smaller-than-expected 48% slump in second-quarter profit, helped by strength in its fixed-income trading. Bank of America Corp also rose 0.4% after beating analysts’ estimates for quarterly profit.

Gains in their shares helped lift the S&P 500 banks index by 0.6%, in what has been a mixed earnings second-quarter season, where trading operations flourished due to market volatility and helped counter much of the weakness in investment banking.

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“You’re getting the feeling that perhaps all the bad news is out of the way and investors are looking to see if this would be a reasonable entry point,” said Rick Meckler, partner at Cherry Lane Investments.

At 12:44 p.m. ET the Dow Jones Industrial Average was up 149.36 points, or 0.48%, at 31,437.62, the S&P 500 was up 28.58 points, or 0.74%, at 3,891.74 and the Nasdaq Composite was up 157.69 points, or 1.38%, at 11,610.11.

The S&P 500 technology sector index rose 1.2%, with chipmaker Nvidia Corp gaining 6.2%.

Worries about a larger 1 percentage point rate hike at the end of July eased following remarks from Fed officials last week that the policymakers could stick to a 75 basis point hike.

Earnings from big technology companies next week will be closely watched, after their shares came under immense selling pressure through much of this year.

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“I think growth stocks will probably outperform (in the second half) as we have the peak in interest rates and perhaps some disappointment on the growth side,” said Jack Ablin, chief investment officer at Cresset Capital Management.

“We also have to recognize that the Fed will be quick to pivot and could actually be easing in the first half of next year.”

Among other shares, Boeing Co jumped 2.1% after Delta Air Lines Inc said it would buy 100 MAX 10 jets worth about $13.5 billion at list prices and had options to buy another 30. Shares of Delta jumped 5.9%.

With the earnings season in full swing, analysts now expect aggregate year-on-year S&P 500 second-quarter profit growth of 6%, down from the 6.8% estimate at the beginning of the quarter, according to Refinitiv data.

The S&P 500 energy sector index jumped 2.5% as crude prices rose by more than $4.

Advancing issues outnumbered decliners by a 3.58-to-1 ratio on the NYSE and by a 2.67-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 30 new lows, while the Nasdaq recorded 25 new highs and 44 new lows. (Reporting by Shreyashi Sanyal, Bansari Mayur Kamdar and Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta and Anil D’Silva)



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