Dow, S&P 500 rise after upbeat earnings from big banks

The Dow and benchmark S&P 500 crept higher on Tuesday after some of the country’s top lenders including Morgan Stanley and Bank of America reported upbeat earnings for the second quarter.

Bank of America added 3.1% as the lender posted a 20% surge in second-quarter profit, and Morgan Stanley gained 4.8% after beating analysts’ expectations for quarterly results.

“So far the banks have come out fairly well, which is not all that unexpected,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Markets are still reeling from China’s raft of unimpressive data and with the economic calendar now light, worries over a stuttering post COVID-19 recovery in the world’s second-biggest economy are likely to linger as Europe wakes up.

The anaemic Chinese recovery has cast a shadow over global markets, particularly in Europe, where consumer, technology, industrials and materials sectors all have significant exposure to China.

That means investors are likely to have a mixed appetite for European stocks.

Focus will be on Europe’s luxury firms, which took a beating on Monday after underwhelming earnings from Cartier owner Richemont, dragging the pan-European STOXX 600 index lower.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down for second straight day after data on Monday showed China’s economy faltered in the second quarter, cranking up pressure on policymakers to deliver more stimulus.

On Tuesday, China announced a series of measures aimed at boosting consumption of household consumer goods and services.

Meanwhile, speculators have amassed their biggest long position in sterling in dollar terms since Brexit. The party in the pound though is unlikely to last, hedge funds and investors say, citing untamed inflation and weak growth.

U.S. Federal Reserve’s rapid interest rate hikes helped some of the largest U.S. banks, including JPMorgan Chase and Wells Fargo, record a profit boost that pointed towards a resilient economy.

“But we can’t really assume that it’s going to be the same (upbeat results) for all companies across the board,” said Pavlik.

PNC Financial Services lowered its forecast for fullyear net interest income (NII) on Tuesday, while brokerage Charles Schwab posted a smaller-than-expected drop in quarterly profit.

Shares of Charles Schwab jumped 13.2%, leading gains on the S&P 500, and those of PNC rose 2.6%.

Overall earnings across industries are expected to de-