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Strong bank earnings send Wall Street to four-week highs

Strong bank earnings send Wall Street to four-week highs

Traders and financial professionals work on the floor of the New York Stock Exchange. (Drew Angerer/Getty Images/AFP)

NEW YORK: Wall Street's major indices hit one-month highs on Wednesday (Jan 16) as upbeat earnings from Bank of America Corp and Goldman Sachs Group Inc boosted investor sentiment.

Goldman Sachs shares surged 9.1 per cent, providing the greatest boost to the Dow, after the bank reported quarterly revenue and earnings that topped estimates. The shares were on pace for their biggest daily percentage gain in more than seven years.

Bank of America shares jumped 7.6 per cent, leading the S&P 500 higher, after the bank reported a higher-than-expected quarterly profit on growth in its loan book.

The two banks' results drove a 2.5 per cent gain in the S&P 500 financial index, which was by far the biggest advancer among the S&P's major sectors. The S&P banking subsector climbed 3.0 per cent.

A strong start to the US earnings season, along with trade optimism and hopes of a slower pace in the Federal Reserve's interest-rate hikes, have helped S&P 500 recoup some of its losses from a recent rout. The index is now less than 11 per cent away from its Sep 20 record close after having fallen as much as 19.8 per cent below that level.

"Banks are finally getting a bit of fresh air," said Kevin Miller, chief investment officer of the E-Valuator Funds in Minneapolis. "The earnings reports are coming out, and the outlook isn't as terrible as what may have been anticipated."

With Wednesday's gains, the S&P 500 is near its 50-day moving average, a key indicator of short-term trends, for the first time since Dec 4. The Nasdaq crossed its 50-day moving average on Tuesday for the first time since Dec 3.

The Dow Jones Industrial Average rose 141.57 points (0.59 per cent) to 24,207.16, the S&P 500 gained 5.80 points (0.22 per cent) to 2,616.10 and the Nasdaq Composite added 10.86 points (0.15 per cent) to 7,034.70. 

Stocks slightly added to gains after the release of the Federal Reserve's Beige Book, which showed moderate wage increases.

They remained steady after British Prime Minister Theresa May's government won a no-confidence vote, a day after May's Brexit deal was roundly defeated.

READ: British government survives no-confidence vote

Among other stocks, United Continental Holdings Inc shares rose 6.7 per cent after the airline posted a quarterly profit that beat expectations.

Shares of First Data Corp soared 20.9 per cent after Fiserv Inc said it had agreed to buy the payment processor for US$22 billion in the biggest-ever deal within the digital payments industry. Fiserv's shares fell 3.7 per cent.

Nordstrom Inc shares fell 5.3 per cent after the department store forecast full-year profit at the lower end of its prior estimates.

S&P 500 companies are expected to report a 14.3 per cent rise in fourth-quarter earnings, lower than the 20.1 per cent growth forecast in October, according to IBES data from Refinitiv.

Advancing issues outnumbered declining ones on the NYSE by a 2.09-to-1 ratio; on the Nasdaq, a 1.80-to-1 ratio favoured advancers.

The S&P 500 posted one new 52-week high and one new low; the Nasdaq Composite recorded 31 new highs and 18 new lows.

Source: Reuters/de

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