Stocks rise on Wall Street after profit reports from banks

NEW YORK (AP) — Wall Street is ticking higher on Monday to kick off a week full of updates on the two things that set stock prices: how much profit companies are making and where interest rates are heading.

The S&P 500 was 0.6% higher in midday trading, on pace for another gain after it broke a five-day losing streak at the end of last week. Stocks of oil companies were leading the way after crude prices rose, while Goldman Sachs rallied after reporting better profit for the spring than expected.

The Dow Jones Industrial Average was up 145 points, or 0.5%, at 31,433, as of 11:20 a.m. Eastern time, and the Nasdaq composite was 1% higher.

Markets have been lurching mostly lower for weeks on worries that the Federal Reserve and other central banks around the world will slam the brake too hard on the economy in hopes of bringing down high inflation. If they're too aggressive with their interest-rate hikes, they could cause a recession.

But some on Wall Street are seeing signs for at least temporary optimism. Oil prices have come off their highs, though they rose about 4% Monday. A key report released last week also indicated expectations are easing for inflation among households. That could prevent a more vicious cycle from taking root and ease the pressure on the Federal Reserve.

Expectations have come down for how aggressively the Federal Reserve will raise interest rates at its meeting next week. Traders are now betting on less than a onein-three chance for a monster hike of a full percentage point, with the majority favoring a 0.75 percentage point increase. As recently as Thursday, the heavy bet was on a hike of a full point.

Economists at Goldman Sachs are among those forecasting a 0.75-point increase, which would match last month's hike. They cited in particular the softening of inflation expectations after Chair Jerome Powell said last month that the Fed pays close attention to them.

Across the Atlantic Ocean later this week, investors expect the European Central Bank on Thursday to raise interest rates for the first time in 11 years to combat inflation. Many investors expect an increase of 0.25 percentage points, “but more is not unthinkable," economists wrote in a Bofa Global Research report.