Wall St. earnings, AI stocks push S&P500 higher
US equities rose Tuesday as results from Bank of America Corp. and Morgan Stanley bolstered bank shares, and a rally in stocks linked to artificial intelligence resumed.
Bank of America delivered a surprise gain from its core Wall Street businesses. Morgan Stanley executives pointed to an improved outlook. And in technology, Microsoft Corp. set an expensive price tag on new AI products, buoying the sector.
The S&P 500 gained 0.7% while Treasury yields pared earlier losses as the corporate updates were coupled with disappointing economic data. Figures on industrial production and retail sales missed estimates, and traders are now fully pricing in a quarter-point hike at the Federal Reserve’s meeting next week.
Signs of slowing inflation and an improving economic picture have led traders to dial back wagers on how high the US overnight benchmark rate will go. However, quarterly forecasts from policy makers have shown a median expectation of two more quarter-point increases this year in order to bring the rate of inflation in line with the Fed’s target.
“The current picture on the consumer is a bit blurry. It seems that excess savings buoyed retail activity in recent months but consumers are quickly depleting those excess reserves and starting to use credit to support spending habits,” Jeffrey Roach, chief economist at LPL Financial, said.
His comments were echoed by Rubeela Farooqi, chief US economist at High Frequency Economics, who said consumers continue to face constraints from higher borrowing costs and elevated prices. “However, a still-strong labor market, positive real disposable incomes and a gradual easing in price pressures appears to be supporting consumption for now.”
In Europe, stocks and bonds were also
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