Stocks Shrug Off ‘Big Bank Gloom’ as Tech Rallies: Markets Wrap

(Bloomberg) — A rally in the world’s biggest tech companies lifted stocks, countering a slew of cautious comments from big bank executives that sent financial shares tumbling.
In a session of many twists and turns, the S&P 500 wiped out losses. Tesla Inc. led gains in megacaps after a bullish analyst call. Oracle Corp. hit an all-time high. Bank of America Corp. said results for investment banking will come in lower than some on Wall Street expected. JPMorgan Chase & Co. also tempered its earnings optimism. Earlier this week, Goldman Sachs Group Inc. signaled its trading unit is on course to drop 10% from the prior year.
Traders also kept a close eye on news that regulators will make changes to their bank-capital rules proposal, cutting the expected impact to the biggest banks by half and exempting smaller ones from large portions of the measure. In the run-up to key inflation data, investors are gearing up for the first debate between former President Donald Trump and Vice President Kamala Harris.
The S&P 500 rose 0.3%. The Nasdaq 100 added 0.7%. The Dow Jones Industrial Average slid 0.3%. A Bloomberg gauge of the “Magnificent Seven” megacaps climbed 1.3%. The Russell 2000 of small firms retreated 0.2%. The KBW Bank Index sank 1.8%.
Treasury 10-year yields dropped six basis points to 3.64%. That’s after a solid $58 billion sale of three-year notes.
US equities are unlikely to slump 20% or more as the risk of a recession remains low against expected interest-rate cuts from the Federal Reserve, according to Goldman Sachs Group Inc. strategists.
The team led by Christian Mueller-Glissmann said while stocks could decline into the year end — hurt by higher valuations, a mixed growth outlook and policy uncertainty — the odds of an outright bear market are slim as the economy is also in part being supported by a “healthy private sector.”
In the run-up to the consumer price index, a 22V Research survey showed that 56% of respondents believe that core CPI is on a Fed-friendly glide path. The share of investors expecting a recession has stayed elevated though.
Aside from that, 48% of investors expect the market reaction to CPI to be “mixed/negligible,” 32% said “risk-on” and only 20% “risk-off.”
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