The Dow and benchmark S&P 500 crept higher on Tuesday after some of the country’s top lenders including Morgan Stanley and Bank of America reported upbeat earnings for the second quarter.
Bank of America added 3.1% as the lender posted a 20% surge in second-quarter profit, and Morgan Stanley gained 4.8% after beating analysts’ expectations for quarterly results.
“So far the banks have come out fairly well, which is not all that unexpected,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
Markets are still reeling from China’s raft of unimpressive data and with the economic calendar now light, worries over a stuttering post COVID-19 recovery in the world’s second-biggest economy are likely to linger as Europe wakes up.
The anaemic Chinese recovery has cast a shadow over global markets, particularly in Europe, where consumer, technology, industrials and materials sectors all have significant exposure to China.
That means investors are likely to have a mixed appetite for European stocks.
Focus will be on Europe’s luxury firms, which took a beating on Monday after underwhelming earnings from Cartier owner Richemont, dragging the pan-European STOXX 600 index lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down for second straight day after data on Monday showed China’s economy faltered in the second quarter, cranking up pressure on policymakers to deliver more stimulus.
On Tuesday, China announced a series of measures aimed at boosting consumption of household consumer goods and services.
Meanwhile, speculators have amassed their biggest long position in sterling in dollar terms since Brexit. The party in the pound though is unlikely to last, hedge funds and investors say, citing untamed inflation and weak growth.
U.S. Federal Reserve’s rapid interest rate hikes helped some of the largest U.S. banks, including JPMorgan Chase and Wells Fargo, record a profit boost that pointed towards a resilient economy.
“But we can’t really assume that it’s going to be the same (upbeat results) for all companies across the board,” said Pavlik.
PNC Financial Services lowered its forecast for full-year net interest income (NII) on Tuesday, while brokerage Charles Schwab posted a smaller-than-expected drop in quarterly profit.
Shares of Charles Schwab jumped 13.2%, leading gains on the S&P 500, and those of PNC rose 2.6%.
Overall earnings across industries are expected to decline 8.1% for the quarter, according to Refinitiv data.
The S&P 500 banks index has fallen 3.9% so far this year, in the aftermath of a banking crisis that took down three lenders and pummeled the sector, underperforming the S&P 500 index that has notched a 17.8% gain in the same period.
In early trading on Tuesday, the banking index was up 1.1%.
Lockheed Martin added 1.1% after the weapons maker raised its annual profit and sales outlook on strong demand for military equipment, stoked by ongoing geopolitical uncertainties.
At 09:50 a.m. ET, the Dow Jones Industrial Average was up 141.63 points, or 0.41%, at 34,726.98, the S&P 500 was up 3.12 points, or 0.07%, at 4,525.91, and the Nasdaq Composite was down 43.61 points, or 0.31%, at 14,201.34.
Eight of the top 11 S&P 500 sectors advanced with industrials leading gains, while technology stocks fell 0.6%.
Wall Street rallied last week after consumer prices and producer prices data provided evidence that the economy had entered a disinflation phase, stoking hopes that the U.S. Federal Reserve will soon end its monetary policy tightening.
Meanwhile, domestic retail sales, reported on Tuesday, rose less than expected in June, though consumer spending appeared to be solid, which likely kept the economy afloat in the second quarter.
Pinterest gained 4.0% as Evercore ISI upgraded its rating on the stock to “outperform”.
Advancing issues outnumbered decliners by a 2.39-to-1 ratio on the NYSE and a 1.56-to-1 ratio on the Nasdaq.
The S&P index recorded 20 new 52-week highs and no new lows, while the Nasdaq recorded 65 new highs and 33 new lows.