U.S. stocks rose on Wednesday, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index inching higher on earnings from big banks and renewed bets on further interest rate cuts from the Federal Reserve.
summary
- Wall Street was optimistic as investors welcomed bank earnings and expected interest rate cuts.
- Stock prices rose despite the US-China trade war.
- Bitcoin also maintained a stable level above $112,000, with a slight return to risk-on behavior.
In contrast to Tuesday’s steep decline, the Dow Jones Industrial Average added 200 points at the start of trading. Midweek trading got off to a similarly strong start, with the S&P 500 and tech-heavy Nasdaq up 0.7% and 0.9%, respectively.
Why are US stocks going up today?
A bullish reversal in global stock markets led to gains across Wall Street, driven largely by investors’ expectations that the Federal Reserve would cut interest rates at its next meeting.
Fed Chairman Jerome Powell’s dovish tone on Tuesday supported market sentiment, with the US central bank chief suggesting the end of the Fed’s balance sheet shrinkage was near.
Investor expectations for further easing in the coming months are supporting the recovery.
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U.S. stocks are also showing resilience as Wall Street cheers strong bank earnings. With the season off to a strong start, most major financial institutions have reported solid earnings so far.
Analysts expect earnings per share for S&P 500 companies to rise 7.9% in the third quarter, according to FactSet data. This forecast means Wall Street is on track to post nine consecutive quarters of earnings growth, although the 7.9% average is slightly lower than the 12% EPS growth in the second quarter.
So far, major financial institutions that have reported higher profits include JPMorgan Chase, Goldman Sachs, Wells Fargo, Citigroup and Bank of America.
The positive outlook for stocks comes amid looming headwinds from the U.S.-China trade war and the ongoing government shutdown.
Dollar falls, Bitcoin rises
Powell’s comments signaled the dollar’s struggle against a basket of peers, with bullish bets on interest rate cuts a key catalyst. A reversal in stock market risk sentiment amid trade tensions also affected the dollar.
The decline in the dollar is reflected not only in stocks but also in cryptocurrencies. Bitcoin (BTC) continued to rise with its price above $112,000 as crypto investors called for a market reset.
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