The Nasdaq led major stock market indexes higher as technology and consumer discretionary stocks gained after banks reported robust earnings and outlooks. Tesla and Amazon both closed more than 6% higher. Bank of America and BNY Mellon also gained more than 5%.
The Nasdaq composite closed 3.4% higher, leading the major indexes. The Dow Jones Industrial Average gained 1.9% and the S&P 500 climbed 2.7%. The small-cap Russell 2000 index rose 3.2%.
Volume rose on both the NYSE and the Nasdaq vs. the same time on Friday.
The yield on the benchmark 10-year Treasury note was flat at 4.02%.
The price of crude oil fell 0.1% to $85.50 per barrel.
Monday, the S&P Consumer Discretionary Sector ETF jumped 4.2%, making it the best-performing sector of the 11 S&P sectors. All 11 sectors gained.
Stock Market Gains On Banks' Rosy Consumer Outlook
Consumer discretionary stocks were followed by the S&P Real Estate Sector ETF, which gained 3.8%. Homebuilders KB Home and Builders FirstSource both gained despite mortgage rates hitting 7% over the weekend. The Housing Market Index for October, due out tomorrow, is expected to show a drop to 44, from last month's 46 reading, according to Econoday.
European markets rose on Monday after the newly installed Chancellor of the Exchequer Jeremy Hunt said that the U.K. government will be reversing almost all of the growth package announced in September's minibudget. The move was seen as support for England's financial markets, which have toiled since the first tax cuts were announced last month. The London FTSE 100 rose 0.9%, while the German DAX gained 1.7% and the French CAC 40 traded 1.8% higher.
Bank of America and Bank of New York Mellon continued the string of bank stocks reporting earnings. Both managed to top estimates for the quarter. BAC stock closed 6.1% higher, and BK stock jumped 5.1%.
Banks Earnings Spiked By Loan Growth
Bank of America's net interest income jumped 24% to $13.8 billion, driven by higher rates and solid loan growth of 12% across the bank. BofA added 418,000 new consumer checking accounts in the quarter to a record 35.6 million, and consumer client balances increased 1% to $1.6 trillion.
In the earnings call, Bank of America said it had zero trading loss days during the quarter. The bank added $378 million to its reserves for credit losses, compared to a release of $1.1 billion last year.
"The customers' resilience and health remain strong," said CEO Brian Moynihan on a call with analysts after the earnings report.
With BofA's Monday jump, the shares have gained over 12% in the last three trading sessions, and are now above their 50-day line.
BNY Mellon's net interest revenue spiked 44% to $926 million thanks to higher interest rates. Its securities services business revenue rose 13% to $2.07 billion and its market and wealth services revenue climbed 17% to $1.37 billion.
However, investment and wealth management revenues fell 16% to $862 million due to lower market values and negative impacts from the stronger dollar. And BNY Mellon's total assets under management tumbled 23% to $1.8 trillion, caused by the market downturn.
U.S. Earnings Still Expected To Be Low
Despite the banks' rosy outlook, expectations for U.S. corporate earnings this season continue to be low.
"The challenges are many, with intense cost pressures and slowing economic growth at the top of the list," said Jeffrey Buchbinder, chief equity strategist for LPL Financial. "The chorus of analysts and strategists calling for big cuts to estimates has gotten louder. Expect estimates to come down, but not collapse."
Among other financial stocks, investment broker Charles Schwab dropped 2.2% despite Schwab reporting Q3 earnings that beat analyst forecasts for both sales and earnings.
Schwab management called the results the "strongest quarterly performance in company history," with net income reaching a record $2 billion. However, total client assets fell 13% to $6.6 trillion as the company reported a $1.4 trillion impact from lower market valuations on client portfolios over the last year.
Continental Resources announced Monday it has entered into a merger agreement with Harold Hamm to take Continental private. Hamm, the billionaire founder and chairman of the shale oil giant, is now offering $74.28 per share, up from his initial offer of $70 per share in June. CLR shares jumped 8.7%.
Roblox skyrocketed over 19.9% after the company released September metrics. It is now testing the 200-day moving average.
Renewable natural gas producer Archaea Energy soared 54% after news that it agreed to be acquired by BP for about $26 per share, or $4.1 billion.
The Innovator IBD 50 ETF surged 1.7%, led by energy stocks Matador Resources, Northern Oil & Gas and CVR Energy.
Energy Stocks Gain On Merger Announcements
Oil giant Exxon Mobil continued to build a consolidation as shares move toward a buy point of 105.67. Investors can also look at the stock chart as an oddly shaped cup with a new handle that offers a 103.42 entry, according to MarketSmith chart analysis.
Among Dow Jones stocks, Apple shares gained 2.9% after Morgan Stanley called it a top pick in the event of a U.S. economic downturn. The Morgan Stanley analyst kept the overweight rating, though they reduced the price target from 180 to 177. Microsoft jumped 3.9% Monday.
Tesla shares rose 7% in advance of the EV automaker's earnings report Wednesday before easing a bit.
Also on the earnings calendar this week are Dow Jones stocks Goldman Sachs and Johnson & Johnson, which will report early Tuesday, while Netflix will kick off tech earnings after the market close Tuesday.
Netflix shares jumped 6.6% in advance of tomorrow's earnings report.
Follow Michael Molinski on Twitter @IMmolinski
