US Stocks Rally as Banks Start a New Earnings Week

US stocks rose as big banks kicked off another busy earnings week and expectations of a big rate hike by the Fed diminished.

At 10:30 a.m. ET, the Dow Jones Industrial Average was up 266 points, or 0.8%, while the S&P 500 rose 0.9% and the NASDAQ Composite rose 1.4%. Goldman Sachs Group Inc (NYSE:GS) beat expectations and its shares rose more than 4% after bond trading helped it overcome weakness in M&A advisory. Bank of America Corp (NYSE:BAC) rose 1.2% after its report showed a decline in investment banking activity as well. Investors are betting that the Federal Reserve will not be as aggressive as some claimed last week after the consumer price index for June showed a 9.1% increase for the 12 months ended last month. High inflation has fueled fears that the Fed could raise interest rates at an unusually aggressive rate of 1%, but investors now expect a 0.75 percentage point hike to match the June move. This would still be one of the biggest moves since the 1990s. The authorities have been trying to contain inflation in recent weeks, helped by a drop in gasoline prices, but it is still not enough. Food prices also remain high and a prolonged heatwave across much of the country means air conditioning bills will take a toll on household budgets this month. This week will also see earnings from Tesla Inc (NASDAQ:TSLA), Twitter Inc (NYSE:TWTR) and Netflix Inc (NASDAQ:NFLX). Oil rose. Crude Oil WTI Futures rose 4% to $98.44 a barrel, while Brent Oil Futures rose 4% to $105.23. Gold Futures rose 0.6% to $1,713 an ounce.