(Bloomberg) — Stocks rose as some of the largest US banks kicked off the earnings season with solid results. Treasuries climbed with oil amid signs Israel is preparing for a ground invasion of Gaza.
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The S&P 500 pushed toward a back-to-back weekly gain. The KBW Bank Index added 1.3%. JPMorgan Chase & Co. jumped 5% on another quarter of record net interest income and a bullish forecast. Wells Fargo & Co. advanced 4% as it beat analysts’ expectations for net interest income and raised its guidance. Citigroup Inc. climbed 3.5% as its rates and currencies traders posted their best third quarter in at least eight years.
“Despite expectations for flat year-over-year earnings with the upcoming third-quarter earnings releases, we fully expect to see modest growth when the dust settles,” said Bryan Reilly, a portfolio manager and senior investment analyst at CIBC Private Wealth US. “This would arrest a string of three consecutive year-over-year declines in quarterly earnings – a traditional earnings recession – and a return to growth that the market desperately needs given its appreciation this year.”
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Swap contracts showed traders trimmed the odds of another central bank hike after Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation is under way and reiterated that he favors holding interest rates where they are, barring a sharp change in data.
Treasury 30-year yields slumped nine basis points to 4.76%, unwinding part of Thursday’s surge that was driven by a somewhat disappointing inflation reading and a weak bond auction. West Texas Intermediate crude hovered near $86 a barrel as Iran said a new front to the conflict between Israel and Hamas was possible, while traders covered bearish bets ahead of widely-expected Israeli military operation.
A sharper escalation of the conflict in the Middle East could bring Israel into direct conflict with Iran, a supplier of arms and money to Hamas, which the US and the European Union have designated a terrorist group. In that scenario, Bloomberg Economics estimates oil prices could soar to $150 a barrel and global growth drop to 1.7% — a recession that takes about $1 trillion off world output.
“The situation in Israel is a horrible one, and if it spreads into a regional conflict, the human costs will rise exponentially, and the financial costs around the globe will begin to rise very, very quickly as well,” said Matt Maley, chief market strategist at Miller Tabak + Co. “In fact, we’re surprised that the level of complacency in the stock market remains as high as it does right now.”
Corporate News
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Microsoft Corp. said it completed its $69 billion purchase of Activision Blizzard Inc. after a nearly two-year fight with global regulators threatened to scuttle the deal.
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UnitedHealth Group Inc. lifted the lower end of its annual profit forecast as lower-than-expected-medical costs helped the company beat quarterly earnings estimates.
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Shares of Boeing Co. and its top supplier fell on a report that the planemaker is expanding inspections of production flaws in 737 Max aircraft, a move that could further delay deliveries of the workhorse jet.
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BlackRock Inc. clients pulled a net $13 billion from long-term investment funds, the first outflows since the onset of the pandemic in 2020.
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PNC Financial Services Group Inc. said it started reducing headcount by 4% as the bank navigates fallout from higher interest rates that has eaten away at profitability.
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Dollar General Corp. Chief Executive Officer Jeff Owen stepped down after nearly a year in the role during which the shares plunged and workplace safety concerns mounted.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.5% as of 10:01 a.m. New York time
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The Nasdaq 100 rose 0.1%
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The Dow Jones Industrial Average rose 0.7%
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The Stoxx Europe 600 fell 0.3%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0522
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The British pound was little changed at $1.2167
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The Japanese yen rose 0.1% to 149.64 per dollar
Cryptocurrencies
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Bitcoin rose 0.4% to $26,839
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Ether rose 0.8% to $1,548.75
Bonds
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The yield on 10-year Treasuries declined eight basis points to 4.61%
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Germany’s 10-year yield declined five basis points to 2.73%
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Britain’s 10-year yield declined five basis points to 4.37%
Commodities
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West Texas Intermediate crude rose 3.6% to $85.92 a barrel
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Gold futures rose 2.1% to $1,922.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
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