Wall Street indexes continue to conquer new record highs during the new week. The leading benchmarks ended the stock trading session on Monday with slight gains but were enough to take a new strong performance. The positive moods of investors are cautious ahead of the start of earnings season this week.
The blue-chip index Dow Jones Industrial Average added more than 27 points (0.1%), reaching a level of 27,359.16 points. The broad S&P 500 barely crossed unchanged, reaching a level of 3,014.30 points. The technology Nasdaq Composite increased by more than 14 points, or 0.17%, to 8,258.18 points.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 2.34% to 12.68.
Earlier today, Citigroup Bank presented its quarterly earnings report, which was better than analysts had expected. Later in the week, other large creditors such as J.P. Morgan Chase, Morgan Stanley, Bank of America and Goldman Sachs, will publish their earnings statements.
The forecasts for the performance of publicly-traded companies are grim. The expectations are the earnings of the S&P 500 companies to fall by 3%, according to FactSet data.
However, the low expectations create the opportunity for the announcements to surprise in a positive way and provide a rebound for stock markets, according to the analysts.
Monday’s trading was on the backdrop of last week’s record, when Dow Jones ended at more than 27,000 points, while the S&P 500 crossed the threshold of 3,000 points. Nasdaq also reached a record level.
The markets were boosted after Federal Reserve Governor Jerome Powell signaled that interest rates were likely to be cut.
Meanwhile, the Federal Reserve Bank of New York’s Empire State manufacturing survey’s main index rebounded 12.9 points to 4.3 in July, the New York Fed said. Economists were calling for a 0.5 reading.
The focus of investors today was also the news that Chinese economic growth slowed to 6.2% in the second quarter compared to a year earlier, which is its lowest rate since at least 27 years amid a continuing trade war with the US. However, the increase in the gross domestic product is in line with market expectations.
US President Donald Trump wrote on Twitter that negative economics data are precisely why China wants to make a deal.
“China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal”, wrote Donald Trump. “with the U.S., and wishes it had not broken the original deal in the first place. In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come. These Tariffs are paid for by China devaluing & pumping, not by the U.S. taxpayer!”, added he.
On bond markets, the yields on 10-year Treasury notes fell by 1.4 basis points to 2.092%, while the 2-year note rate was virtually unchanged at 1.833%. The 30-year bond yield slipped 2.3 basis points to 2.611%.
Corporate stocks performance
The stocks of Amazon added 0.5% after the online retailing giant kicked off its annual Prime Day shopping event, a 48-hour sale of more than a million products that rivals Black Friday and Cyber Monday for US retail influence. Amazon is Real Money’s Stock of the Day.
Symantec shares tumbled by 10.7% amid reports that chipmaker Broadcom has walked away from takeover talks with the cybersecurity firm. Local media said Broadcom was unwilling to extend any offer past 28 USD per share, a level that Symantec had insisted on in order to give what it viewed as a fair valuation to its overall business, which includes its Norton and LifeLock product suites.
The stocks of Facebook inched lower by 0.5% following reports that Democratic lawmakers are planning legislation that would prevent tech companies from issuing digital currencies. Separately, Treasury Secretary Steven Mnuchin said during a press conference Monday that Facebook’s proposed digital currency, Libra, “could be misused by money launderers and terrorist financiers”.
The shares of Boeing fell by 1%, as investors reacted to news that American Airlines has extended cancellations of the grounded 737 MAX for a fourth time, taking the troubled aircraft out of commission until at least November.
The top performers on the S&P 500 were CF Industries Holdings Inc (+3.66%), Advanced Micro Devices Inc (+3.55%) and Wynn Resorts Limited (+2.98%), while on the flipside were Symantec Corporation (-10.68%), Pacific Gas & Electric Co (-8.66%) and Chesapeake Energy Corporation (-5.18%).
Corporate earnings reports
Citigroup beat analysts’ expectations for second-quarter profit and revenue on gains from the initial public offering of electronic bond trading platform Tradeweb. The bank posted a profit of 4.79 billion USD, or 1.95 USD per share, compared with the 1.80 USD estimate of analysts. Excluding the impact of the IPO, the bank would have posted 1.83 USD per share in profit, fueled by lower taxes and a reduction in the number of outstanding shares. While per-share profit surged 20% in the quarter, the company’s revenue gain was more muted on declines in trading and investment banking revenue and losses on loan hedges. The bank said revenue climbed 2% to 18.76 billion USD, exceeding the 18.5 billion USD estimate, powered by a 350 million USD pretax gain on the Tradeweb IPO. Revenue in Citigroup’s global consumer bank rose 3% to 8.5 billion USD as profit climbed 11% to 1.41 billion USD, compared to the 1.49 billion USD estimate of analysts. The bank cut companywide expenses 2% to 10.5 billion USD, and its efficiency ratio improved to 56% from 58% a year ago.
JB Hunt came out with quarterly earnings of 1.37 USD per share, beating the analysts’ estimates of 1.35 USD per share. This compares to earnings of 1.37 USD per share a year ago. These figures are adjusted for non-recurring items. JB Hunt posted revenues of 2.26 billion USD for the quarter ended June 2019. This compares to year-ago revenues of 2.14 billion USD. The company has topped consensus revenue estimates two times over the last four quarters.