Dow climbs over 300 as Wall Street rallies for 2nd straight day

Stocks closed higher for a second straight day on Tuesday as solid quarterly results from Goldman Sachs and Lockheed Martin lessened worries of a weak earnings season.

Wall Street’s main indexes jumped on Tuesday as strong earnings from Goldman Sachs ignited hopes that upbeat corporate reports could help soothe market worries of a potential recession due to rising inflation and interest rates.

The Dow Jones Industrial Average surged 337.98 points, or 1.1%, to 30,523.80, the S&P 500 was up 1.1%, at 3,719, and the Nasdaq was up 0.9%, at 10,772.

Goldman Sachs jumped 2.5% after reporting a smaller-than-expected drop in quarterly profit due to a slowdown in investment banking, which was cushioned by a boost in net interest income. 

“The banks were good… we’ll see if some of the other ones, more of the consumer sensitive ones, can they pass through their cost increases, have they stopped passing them though, but yeah people are hoping for better,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, NJ.

“We need to see more of the earnings data, we need to see more of the data that will knock down inflation and then you can maybe get your rally going, until then I think everybody would say treat all rallies as suspect.”

Goldman, which is reorganizing its business into three units, wrapped up earnings from big US banks on a largely positive note, even though several lenders raised the loan loss provisions in anticipation of troubled times ahead.

“The main focus was to what extent a drop would have taken place to understand if the Fed’s attempt for a soft landing is something that can be actually managed, or if we are just about to enter a deep and unstoppable recession,” Petrelli said.

Over the last two months, all the three major stock indexes have lost more than 12% as investors worry that the Federal Reserve’s war on inflation may hobble the economy.

While economic indicators continue to point to a likely recession, latest data showed factory output rose in September, indicating that the manufacturing sector remains on reasonable footing despite rising interest rates. 

Analysts now expect profit for S&P 500 companies to have risen just 2.8% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

Meanwhile, a report said ratings agency Fitch has slashed US growth forecasts for this year and next and was set to warn that the Fed’s interest rate hikes and inflation will drive the economy into a 1990-style recession.