What drove markets

Financial-market sentiment improved on Monday as the result of better-than-expected earnings from Bank of America Corp.
BAC,
+6.06%,
as well as developments in the U.K. under new finance minister Jeremy Hunt.

Hunt, the new Chancellor of the Exchequer, abandoned the majority of the £45 billion ($51 billion) in previously announced unfunded tax cuts that were blamed for sparking a bout of global market volatility and stoking fears of a broader breakdown of the global financial system. That contributed to a sharp pullback on yields on the 30-year gilt BX:TMBMKGB-30Y, or U.K. equivalent of Treasurys, which fell 48 basis points to 4.37%.

See: U.K. chancellor throws out almost all major tax cuts from the mini-budget and pares back energy support

“There’s a combination of things giving investors some relief in terms of what’s going on,” said Jon Maier, chief investment officer of New York-based Global X ETFs, which oversaw $47 billion of assets as of August. One of them is the action taken by Britain’s new finance minister and the other is U.S. corporate earnings “which have not been as bad as expected,” he said via phone.

Earnings season is set to pick up steam after a round of earnings from major Wall Street banks on Friday. Investors welcomed results Monday from Bank of America, while Goldman Sachs Group Inc. GS is due to report Tuesday.

In Monday’s only major U.S. economic release, the New York Fed’s Empire State manufacturing index had its third straight negative reading, declining 7.6 points to negative 9.1 in October, compared with expectations for a reading of negative 5.

Meanwhile, last week’s volatile activity had investors weighing whether stocks could continue sliding deeper into bear markets.

“Given ongoing uncertainty on the economy and on the earnings front, we think there’s further downside,” said Michael Reynolds, vice president of investment strategy at Glenmede in Philadelphia, which manages $40.2 billion in assets. “We don’t think we’ve seen a bottom yet. In a recession-type of environment, it’s typical to go through fair valuations on U.S. stocks, which we put at 3,250 for the S&P 500 and which is where we are mentally marking the downside,” he said via phone.

Companies in focus

• Bank of America shares
  BAC,
  +6.06%
  finished up by almost 6.1% after the bank topped Wall Street’s earnings, revenue and net interest income expectations for the third quarter.

• Shares of Dow component Goldman Sachs ended higher by 2.2% after The Wall Street Journal reported that the investment-banking giant is said to be planning to combine its flagship investment-banking and trading businesses into one unit, while merging asset and wealth management into another.

• Rupert Murdoch has proposed a recombination of Fox Corp.
  FOXA,
  -9.41%

  FOX,
  -8.09%
  and News Corp.,
  NWSA,
  +3.40%

  NWS,
  +2.51%
  the two wings of his media empire, nearly a decade after they split, The Wall Street Journal reported. News Corp. is the parent company of Dow Jones, publisher of The Wall Street Journal and MarketWatch, as well as other assets including HarperCollins Publishers and news organizations in the U.K. and Australia. Class A shares of News Corp. finished up by 3.4%, while those of Fox ended down by 9.4%.

— Steve Goldstein contributed to this article.