(Recasts with preliminary close of trading)

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Bank of America ( BAC ) beats Wall Street estimates for profit

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Morgan Stanley's ( MS ) shares hit record high after Q3 profit

beats

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US chipmakers gain on renewed AI optimism

By Noel Randewich

Oct 15 (Reuters) - The S&P 500 ended higher on

Wednesday, with Morgan Stanley ( MS ) and Bank of America ( BAC ) rallying

after solid quarterly results, while investors remained focused

on the recent increase in China-U.S. trade tensions.

Morgan Stanley's ( MS ) shares hit a record high, while Bank

of America ( BAC ) rose after the top lenders beat Wall Street

estimates for third-quarter profit on dealmaking strength.

The S&P 500 banking index rose in its first

three-day winning streak in more than three weeks.

A day earlier, Goldman Sachs ( GS ) and JPMorgan Chase ( JPM )

reported solid performance in investment banking and predicted

that the business would continue to boom.

This week's bank results indicate strength for major U.S.

companies as third-quarter earnings season kicks off, and they

also provide hints of the economy's health while many

macroeconomic reports remain on hold due to a government

shutdown.

"People are spending, and the consumer seems to be fine.

That's been one of the messages from the bank earnings," said

Thomas Martin, senior portfolio manager at GLOBALT in Atlanta.

"Employment is not falling like a stone. Both inflation and

employment are within ranges that are basically reasonable."

The Philadelphia Semiconductor Index jumped after ASML

reported third-quarter orders and operating

income above market expectations, lifted by booming AI

investment.

An investment consortium including BlackRock, Microsoft and

Nvidia will buy one of the world's biggest data center operators

in a $40 billion deal. Shares of data center firms rose, with

Applied Digital ( APLD ) surging.

According to preliminary data, the S&P 500 gained

27.19 points, or 0.41%, to end at 6,671.50 points, while the

Nasdaq Composite gained 148.43 points, or 0.66%, to

22,670.13. The Dow Jones Industrial Average fell 2.83

points, or 0.01%, to 46,267.63.

U.S. Treasury Secretary Scott Bessent told CNBC that Washington

did not want to escalate a trade conflict with China,

emphasizing that President Donald Trump is ready to meet Chinese

President Xi Jinping in South Korea later this month.

On Tuesday, Trump said Washington was considering cutting some

trade ties with China, including in relation to cooking oil.

Also on that day, the two countries began imposing tit-for-tat

port fees.

Bessent also said he plans to present three or four Federal

Reserve chief candidates to Trump for him to interview sometime

after the U.S. Thanksgiving holiday.

Fed Governor Stephen Miran at a CNBC event said "two more cuts

this year sounds realistic," noting that the labor market has

clearly weakened. Fed Chair Jerome Powell also left the door

open to rate cuts on Tuesday.

The Fed said in its latest Beige Book report compiled through

October 6 that some employers reported cutting jobs due to

economic uncertainty, and in some cases, due to increased

investment in AI. The report also showed the labor supply in

hospitality, agriculture, construction and manufacturing was

strained due to the Trump administration's crackdown on illegal

immigration.

Abbott declined following downbeat quarterly revenue

from the medical equipment maker.

Progressive Corp ( PGR ) fell after the insurer reported

third-quarter results.

Bunge jumped despite the grain trader lowering its 2025

earnings forecast following its merger with Viterra.