Wall St climbs as Goldman winds up big bank earnings on upbeat note

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By Ankika Biswas and Shreyashi Sanyal

(Reuters) - Wall Street's main indexes jumped on Tuesday as strong earnings from Goldman Sachs ignited hopes that upbeat corporate reports could help soothe market worries of a potential recession due to rising inflation and interest rates.

Goldman Sachs Group Inc (NYSE:GS) jumped 4.58% after reporting a smaller-than-expected drop in quarterly profit due to a slowdown in investment banking, which was cushioned by a boost in net interest income.

"It looks like rising borrowing costs, which are boosting net interest income, are working as a sort of parachute for the banks, while the slowing economy is still robust to handle the pain," said Guido Petrelli, founder and chief executive officer of Merlin Investor.

The investment bank, which is reorganizing its business into three units, wrapped up earnings from big U.S. banks on a largely positive note, even though several lenders raised the loan loss provisions in anticipation of troubled times ahead.

"The main focus was to what extent a drop would have taken place to understand if the Fed's attempt for a soft landing is something that can be actually managed, or if we are just about to enter a deep and unstoppable recession," Petrelli said.

Over the last two months, all the three major U.S. stock indexes have lost more than 12% as investors worry that the U.S. Federal Reserve's war on inflation may hobble the economy.

Johnson & Johnson (NYSE:JNJ) shares reversed course to dip 0.29% after the healthcare conglomerate said it may have to cut jobs in anticipation of an economic slowdown.

While economic indicators continue to point to a likely recession, latest data showed U.S. factory output rose in September, indicating that the manufacturing sector remains on reasonable footing despite rising interest rates.

Analysts now expect profit for S&P 500 companies to have risen just 2.8% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

Meanwhile, a report said ratings agency Fitch has slashed U.S. growth forecasts for this year and next and was set to warn that the Fed's interest rate hikes and inflation will drive the economy into a 1990-style recession.

At 10:01 a.m. ET, the Dow Jones Industrial Average was up 539.37 points, or 1.79%, at 30,725.19, the S&P 500 was up 66.76 points, or 1.82%, at 3,744.71, and the Nasdaq Composite was up 203.62 points, or 1.91%, at 10,879.42.

All the 11 major S&P 500 sector indexes rose, with cyclical financials and materials rising 2% each. The S&P 500 banks index was up 2.81%.

The Nasdaq led gains as megacap technology and other growth names like Apple Inc (NASDAQ:AAPL), Meta Platforms, Amazon.com (NASDAQ:AMZN) and Nvidia (NASDAQ:NVDA) Corp rose between 2.30% and 1.99%, keeping with declines in the benchmark 10-year Treasury note. [US/]

Microsoft Corp (NASDAQ:MSFT) gained 0.97% after a report it was laying off under 1,000 employees this week, becoming the latest U.S. technology company to cut jobs or slow hiring amid a global economic slowdown.

Netflix (NASDAQ:NFLX) added 0.68% ahead of its earnings report after markets close.

Advancing issues outnumbered decliners by a 8.42-to-1 ratio on the NYSE and by a 5.40-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and one new low, while the Nasdaq recorded 45 new highs and 24 new lows.