US stocks charged ahead in another session of big swings on Tuesday, extending a rally that kicked off a busy week of third-quarter earnings reports.
The S&P 500 (^GSPC) advanced 1.2%, though after showing gains from a stronger move higher earlier in the session, while the Dow Jones Industrial Average (^DJI) it added about 340 points, or 1.1%. The Nasdaq Technology 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 topped analysts’ estimates despite tough year-over-year comparisons. Shares closed roughly 2% higher.
In an interview with CNBC, CEO David Solomon warned that there was a “good chance” the US economy could enter a recession next year.
“This environment heading into 2023 is one to be cautious and prepared for,” he said.
Goldman Sachs is the last of the country’s six megabanks to announce results. Despite better-than-expected figures from some finance names that gave shares a boost on Monday, the banking sector reported a 13% year-on-year earnings decline for the third quarter, driven mainly by increased provisions for loan losses to prepare for a possible recession, according to FactSet Research. Wall Street’s big banks are indicators of the US economy and often set the tone for earnings season.
Elsewhere on the corporate front, shares of Carnival ( CCL ) rallied nearly 11% after Carnival Holdings, a subsidiary of the cruise operator, announced it will offer $1.25 billion in senior priority notes due 2028 and will use the proceeds to cover debt and other expenses.
Shares of Colgate-Palmolive Company ( CL ) were slightly higher, closing up 1% after a CNBC report that Daniel Loeb’s Third Point has built up a substantial stake in the company and sees value in a possible spin-off of its Hill’s Pet Nutrition business and other brands.
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Shares of Salesforce ( CRM ) also rose more than 4% after activist investor Jeffrey Smith said his investment firm Starboard Value has engaged with the company’s management about possible ways to ‘strengthen your assessment.
Tuesday’s moves capped a second straight positive day on Wall Street after the three major averages rebounded in the previous session, with the S&P 500, Dow and Nasdaq gaining 2.7%, 1.9% and 3, 4%, respectively.
“As we keep reminding you, this kind of outsized movement is not historically indicative of either a healthy market or an investable low,” DataTrek Research co-founder Jessica Rabe said in a note.
The number of days the S&P 500 gained more than 1% was 54 last year. Monday’s bounce brings the annual number of such gains to 100, a significant threshold the benchmark has reached only seven other years in the past six decades: during the Saudi oil embargo, the Dotcom bubble of 2000, the global financial crisis of 2008. , and the pandemic crash of 2020.
With stock inflows near a record last week, investors have increased bets that a market fund is in the offing. But many Wall Street strategists have argued that optimism is premature, especially as it begins what is expected to be a murky earnings season.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 14, 2022. REUTERS/Brendan McDermid
Bank of America’s survey of global fund managers found on Tuesday morning that 91% of respondents said corporate earnings are unlikely to rise 10% or more next year, the highest proportion of investors in the survey’s history, a sign of further downside for futures earnings. -estimates per share of the S&P 500 index.
As such, BofA analysts deemed any signs of an end to the equity decline as almost just “tasty fodder for another bearish rally,” adding that the institution projects a “big low” and a subsequent “big upturn” in the first half of 2023, when the Federal Reserve is expected to reverse course and begin cutting rates.
This month’s survey “calls for macro capitulation, investor capitulation, the beginning of political capitulation,” wrote strategists led by Michael Hartnett.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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