Wall Street jumps as solid BofA results spark rally; Dow up 600 pts

Bank of America posts better-than-expected Q3 results; Goldman Sachs up on report of major business overhaul S&P surges 2.85%, Nasdaq 3.37%

Wall Street's main indexes jumped on Monday as Bank of America led gains among lenders after reporting better-than-expected results that were underpinned by the Federal Reserve's rapid rate hikes.

Bank of America Corp rose 6.2% as the lender benefited from higher net interest income in its third quarter, even though it added $378 million to its loan-loss reserves.

"BAC benefited from a higher interest rate environment in both the yields on the newly issued loans and the growth of the number of depositors," said Siddharth Singhai, chief investment officer of New York-based investment firm Ironhold Capital.

"This is a direct result of higher interest rates offered by the banks looking very attractive compared to other risk assets.

Lending will slow down quite a bit over the upcoming quarters, so a better reserve ratio would buttress them from a huge drop in demand."

Bank of NY Mellon Corp also benefited from higher rates, sending its shares up 6.1%.

Overall, higher rates boosted interest incomes for lenders in the third quarter but turbulent markets choked off dealmaking and banks set aside more funds to brace for an economic slowdown.

The S&P 500 banks index was up 3.8%. All the 11 S&P 500 sector indexes were higher with technology, communication services and consumer discretionary leading with near 3% gains each.

Wall Street is deep in bear market territory, with economic indicators pointing to little signs of decades-high inflation cooling, but some analysts noted that stocks at such depressed levels could pave the way for short-term rallies.

"It's more just short-term technicals where you've got people overextended on the downside," said Jonathan Waite, fund manager at Frost Investment Advisors.

Traders are pricing in a small chance of a 1% hike by the Fed in its November meeting.

Shares of Goldman Sachs, which will post results on Tuesday, were up 2.7%, following reports of a plan to combine its investment banking and trading businesses.

Major megacap growth stocks like Apple Inc, Meta Platforms Inc, Amazon.com and Tesla Inc added between 3% and 4% as the yield on U.S. 10-year bonds retreated from multi-year highs.

Tesla Inc, Netflix and Johnson & Johnson are also expected to report results later in the week.

Analysts now expect profit for S&P 500 companies to have risen just 3% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

At 10:22 a.m. ET the Dow Jones Industrial Average was up 606.69 points, or 2.05%, at 30,241.52, the S&P 500 was up 102.14 points, or 2.85%, at 3,685.21 and the Nasdaq Composite was up 347.40 points, or 3.37%, at 10,668.79.

Advancing issues outnumbered decliners by a 11.76-to-1 ratio on the NYSE and by a 5.26-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and two new lows, while the Nasdaq recorded 51 new highs and 59 new lows.