Dow advances more than 100 points to kick off a busy week of earnings, Goldman tops expectations

U.S. stocks rose Monday as Goldman Sachs reported an earnings beat to start a busy week of quarterly reports, and as investors bet that the Federal Reserve will be less aggressive against inflation than feared.

The Dow Jones Industrial Average added 186 points, or 0.60%. S&P 500 gained 0.73%, while the Nasdaq Composite advanced 0.98%.

Earnings were front and center as investors anticipated a slew of major reports this week that will shed light on the state of the U.S. economy. More big banks reported this week following mixed results last week from JPMorgan Chase and Morgan Stanley.

"We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data," Citi's Scott Chronert said in a recent note.

On Monday, Goldman Sachs posted earnings and revenue that easily beat expectations, even as CEO David Solomon said Monday that inflation is "deeply entrenched" in the economy. Shares popped nearly 4%.

Bank of America reported quarterly revenue that beat analyst expectations, with shares climbing 1%. IBM will post results after the closing bell.

Other major companies set to report earnings this week include Johnson & Johnson, Netflix, Lockheed Martin, Tesla, United Airlines, Union Pacific, Verizon and a host of other firms.

Despite the growing recession fears, S&P 500 companies are expected to post a 4.2% increase in second-quarter profit, according to consensus analyst estimates gathered by FactSet. S&P 500 members are also expected to post a 10.2% increase in revenue for the period, according to FactSet.

Profit expectations for the full year are still high with S&P 500 companies estimated to post a 9.9% earnings increase for 2022, estimates collected by FactSet show.

"We expect the results to be generally okay," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "I think focus will primarily be on margins and to the extent to which companies are able to pass along higher input costs, that'll dictate where perhaps valuations can go."

Meanwhile, Boeing shares gained 2% on news that Delta Air Lines was buying 100 737 Max 10 planes.

Investors are wagering that the Fed will be less aggressive than feared at its meeting later this month. A Wall Street Journal report Sunday said the central bank is on track to lift interest rates by 75 basis points, instead of the full percentage point increase forecasted by some market participants.

Goldman Sachs chief economist Jan Hatzius also said in an overnight note that he expected the Fed to raise rates by 0.75 percentage points.

Still, recession fears have been prominent in recent weeks as Wall Street worries that aggressive action from the Fed will ultimately tip the economy into a recession, as market participants contend with decades-high inflation, sharply rising interest rates, and an inverted yield curve.

"Markets are likely to remain volatile in the coming months and trade based on hopes and fears about economic growth and inflation," Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a recent note to clients.

"A more durable improvement in market sentiment is unlikely until there is a consistent decline both in headline and in core inflation readings to reassure investors that the threat of entrenched price rises is passing," he added.