Wall Street indexes rise amid volatility supported by optimism in corporate results

Wall Street saw sharp swings as investors tried to gauge the extent of trade tensions between the world’s two largest economies. Stocks rose, then fell, before rising again, supported by optimism in corporate earnings results. After one of the best half-year periods for stocks since the 1950s, the market experienced brief waves of profit-taking, described as a “healthy correction” after a strong rally. These declines were short-lived, amid expectations that the Federal Reserve’s rate cut would maintain the positive momentum in US corporate profits. After a rally that pushed the S&P 500 index to 1.2% gains, the index returned to declines around 1 p.m. New York time, then returned to positive territory after only about 30 minutes. Corporate results dominate trade war fears Investors are closely watching any developments related to the dispute between the United States and China, but they have quickly returned their focus to the fundamentals that have sent the S&P 500 index up more than $15 trillion since last April’s collapse. At the start of the earnings season, shares of Morgan Stanley and Bank of America jumped after announcing strong results, while positive statements about artificial intelligence from ASML Holding boosted shares of electronic chip companies. Later in the session, United Airlines Holdings announced earnings that beat expectations. “Investors buying the dip continue to be the main drivers of the market, keeping sentiment strong despite signs of technical stress,” says Nationwide’s Mark Hackett. Rising business risks and cautious optimism US bond prices halted after a rally that pushed two-year bond yields to their lowest level since 2022, while gold rose above the $4,200 level. Despite the market’s resilience, the ongoing escalation between Washington and Beijing has reminded investors of fears that the two economic powers could slide into an all-out trade war. Also read: Trump and Xi ignite a new trade crisis and the global economy is on fire. US Treasury Secretary Scott Besent has proposed extending the waiting period on imposing high tariffs on Chinese goods in exchange for Beijing backing down from its recent plan to tighten restrictions on rare earth fertilizers. Picent said at an event hosted by CNBC that President Donald Trump is ready to meet with Chinese President Xi Jinping later this month. Demands within the Fed to accelerate interest rate cuts For his part, Federal Reserve Board member Stephen Miran said that trade tensions have increased uncertainty about growth prospects, making it necessary for the central bank to accelerate the pace of interest rate cuts. He added during a CNBC event: “There are more downside risks now than there were a week ago, and I believe it’s our duty as lawmakers to reflect that in policies.” He pointed out that the uncertainty in trade policies between China and the United States has added “new risks” to the economic landscape. Also read: The Federal Reserve is monitoring an uneven slowdown in the US economy, and despite the noise from the recent tariffs, HSBC’s Max Ketner said that economic fundamentals are still strong, indicating that he enters 2026 with a “risk-on” position, with US growth expectations easily exceeded. Increased confidence and a possible “consolidation” phase “The third quarter results are important, but they look back,” says Stephen Kates of Bank REIT. “What I will be watching closely is future guidance, especially possible signs of optimism.” He added, “Positive guidance could be self-reinforcing on Wall Street and the real economy as rising stock prices support business and consumer confidence, encouraging increased real spending.” As for CFRA’s Sam Stovall, he said the market may not yet have consumed its recent gains, explaining that “further consolidation may be on the horizon as the base of gains has shrunk, but not enough to indicate an oversold condition.” He added that in the event of an additional drop, weak prices should be used to buy, noting that no year since World War II has seen two sharp corrections. Both exceed 10%, with the average drop reaching 8.5%. “The third quarter earnings results should support our view that the bull market remains, driven by sustainable earnings growth and lower interest rates,” said David Lefkowitz of UBS Global Wealth Management. Individual investors remain motivated According to Scott Rubner of Citadel Securities, demand from… Individual traders on call options exceeded sell orders for 24 consecutive weeks, the longest period since November 2023 based on data going back to 2020. He added that investor confidence in the stock market “remains exceptional.” As for Piper Sandler’s Craig Johnson, he said: “While we believe a consolidation phase is likely with investors focusing on third-quarter earnings, we should continue to … seize buying opportunities on dips as we enter the fourth year of this bull market.”