The stock market rallied on Monday to kick off a big week of earnings as the latest quarterly results from big banks provided further clues about the health of the economy, with investors now expecting the Federal Reserve to be less aggressive about hiking rates at its upcoming policy meeting.
Markets jumped to start the week: The Dow Jones Industrial Average rose 1%, over 300 points, while the S&P 500 gained 0.9% and the tech-heavy Nasdaq Composite 1.2%.
Investors assessed the latest second-quarter earnings from major banks, with shares of Goldman Sachs gaining roughly 4% after the firm exceeded revenue and profit expectations thanks to “significantly higher” bond trading activity, though overall profits fell almost 50% from a year ago .
Bank of America similarly topped revenue expectations thanks to solid results that were boosted by higher interest rates, with the stock rising nearly 3% despite warnings of a “weakened capital markets environment.”
Though recession fears have continued to weigh on markets, earnings have yet to show signs of a major slowdown—with S&P 500 companies still expected to post increases in second-quarter profits and revenue, according to FactSet data.
Traders are now betting that the Federal Reserve will be less aggressive than previously feared at its upcoming policy meeting later this month: While some forecasts last week had called for a 100-basis-point rate increase, most experts now predict a hike of 75 basis points.
The Wall Street Journal reported on Sunday that the central bank will raise interest rates by 75 basis points for the second straight meeting in a row, a sentiment echoed by Goldman Sachs chief economist Jan Hatzius in an overnight note to clients.