US equities cut ahead in another session of outsized swings on Tuesday, extending a comeback that began a busy week of big-name third-quarter earnings reports.
[Click here to read what’s moving markets on Wednesday, Oct. 19]
The S&P 500 (^GSPC) advanced 1.2%, but pared gains from a sharp move higher earlier in the session, while the Dow Jones Industrial Average (^DJI) added around 340 points, or 1.1%. The tech-heavy Nasdaq Composite (^IXIC) closed up 0.9%.
Sentiment was boosted Tuesday by third-quarter results from Goldman Sachs ( GS ) — Wall Street’s top investment bank — which posted earnings that beat analysts’ estimates around the world despite challenging year-over-year comparisons. Shares closed about 2% higher.
In an interview with CNBC, CEO David Solomon warned that there was a “good chance” the US economy could go into recession next year.
“You have to be alert and prepared for that environment going into 2023,” he said.
Goldman Sachs is the last of the country’s six megabanks to reveal results. Despite better-than-feared figures from some financial names that boosted stocks on Monday, the banking industry reported a 13% year-over-year earnings decline for the third quarter, driven mainly by increased provisions for loan losses to prepare for a recession possible, according to FactSet Research. Wall Street’s big banks are the bellwether of the US economy and usually set the tone for earnings season.
Elsewhere in corporate affairs, shares of Carnival ( CCL ) jumped nearly 11% after Carnival Holdings, a subsidiary of the cruise operator, announced it will offer $1.25 billion of senior preferred notes due 2028 and use the proceeds to finance debt and cover other costs.
Shares of Colgate-Palmolive Company ( CL ) were slightly higher, closing up 1% after a CNBC report that Daniel Loeb’s Third Point has amassed a significant interest in the company and sees value in a potential spinoff of its Hill’s Pet Nutrition business and other brands .
Shares of Salesforce (CRM) also climbed more than 4% after activist investor Jeffrey Smith said his investment firm Starboard Value has approached the company’s management about possible ways to bolster its valuation.
Tuesday’s moves capped a second straight positive day on Wall Street after the big three averages combined in the previous session, with the S&P 500, Dow, and Nasdaq notching gains of 2.7%, 1.9%, and 3.4%, respectively. respectively.
“As we continue to remind you, this kind of outsized transition is not a historical sign of either a healthy or low investment market,” said DataTrek Research Co-Founder Jessica Rabe in a note.
The number of days the S&P 500 gained more than 1% was 54 last year. Monday’s bounce brings the year-to-date tally of such gains to 100 – an important threshold that the benchmark index has reached only seven other years in the past six decades: during the Saudi oil embargo, the 2000 Dotcom Bubble, the Crisis Global Finance 2008. , and pandemic crash 2020.
With stock inflows near a record last week, investors are increasingly betting that the bottom of the market is in. But many Wall Street strategists have argued that optimism is premature, especially as a murky earnings season begins.
A Bank of America global fund manager survey on Tuesday morning found that 91% of respondents said corporate earnings are unlikely to rise 10% or more in the next year, the highest share of investors in history the survey – an additional downside signal for earnings going forward. – per share estimates for the S&P 500 index.
As such, BofA analysts considered any indication that the common equity path is in the offing just “tasting boots for another bear rally,” adding that the institution anticipates a “big low” followed by a “big rally” in the first half of 2023, when the Federal Reserve is expected to change course and start cutting rates.
“This month’s survey cuts macro capitalization, investor capitalization, policy capitalization,” wrote strategists led by Michael Hartnett.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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