By Vivien Lou Chen and William Watts
All three major U.S. stock indexes finished higher on Monday, giving the Nasdaq Composite its biggest one-day percentage gain since July, as investors awaited a deluge of corporate earnings and after a U-turn on tax policy by the U.K. government helped soothe global bond markets.
Stocks experienced extremely volatile trade last week, with major indexes reversing steep losses Thursday to end sharply higher only to tumble againon Friday. The Dow saw a 1.2% weekly fall, while the S&P 500 shed 1.6% and the Nasdaq Composite lost 3.1%.
What drove markets
Financial-market sentiment improved on Monday as the result of better-than-expected earnings from Bank of America Corp.(BAC), as well as developments in the U.K. under new finance minister Jeremy Hunt.Hunt, the new Chancellor of the Exchequer, abandoned the majority of the GBP45 billion ($51 billion) in previously announced unfunded tax cuts that were blamed for sparking a bout of global market volatility and stoking fears of a broader breakdown of the global financial system. That contributed to a sharp pullback on yields on the 30-year gilt BX:TMBMKGB-30Y, or U.K. equivalent of Treasurys, which fell 48 basis points to 4.37%.See: U.K. chancellor throws out almost all major tax cuts from the mini-budget and pares back energy support"There's a combination of things giving investors some relief in terms of what's going on," said Jon Maier, chief investment officer of New York-based Global X ETFs, which oversaw $47 billion of assets as of August. One of them is the action taken by Britain's new finance minister and the other is U.S. corporate earnings "which have not been as bad as expected," he said via phone.Earnings season is set to pick up steam after a round of earnings from major Wall Street banks on Friday. Investors welcomed results Monday from Bank of America, while Goldman Sachs Group Inc. GS is due to report Tuesday.In Monday's only major U.S. economic release, the New York Fed's Empire State manufacturing index had its third straight negative reading, declining 7.6 points to negative 9.1 in October, compared with expectations for a reading of negative 5.Meanwhile, last week's volatile activity had investors weighing whether stocks could continue sliding deeper into bear markets."Given ongoing uncertainty on the economy and on the earnings front, we think there's further downside," said Michael Reynolds, vice president of investment strategy at Glenmede in Philadelphia, which manages $40.2 billion in assets. "We don't think we've seen a bottom yet. In a recession-type of environment, it's typical to go through fair valuations on U.S. stocks, which we put at 3,250 for the S&P 500 and which is where we are mentally marking the downside," he said via phone.
Companies in focus
-- Steve Goldstein contributed to this article.
-Vivien Lou Chen
(END) Dow Jones Newswires
October 17, 2022 16:30 ET (20:30 GMT)
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