Stock market today: Dow, S&P 500 build on records as a retail sales surprise fuels rate cut hopes
07/16/2024 20:51
Investors assessed another batch of big bank earnings and looked to fresh retail data amid growing conviction an interest-rate cut is near.
US stocks opened higher on Tuesday, as investors assessed big bank earnings and a retail sales surprise amid growing conviction an interest-rate cut is near.
The Dow Jones Industrial Average (^DJI) rose roughly 0.5% shortly after the opening bell, after the blue-chip index topped 40,000 to notch an all-time closing high. The S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) were each up more than 0.3% on the heels of their own daily wins.
Earnings season picked up pace before the bell, with Bank of America (BAC) and Morgan Stanley (MS) the latest to report. BofA quarterly profit fell but beat estimates, while MS profit jumped, both offering signs of an investment banking revival. Results from Charles Schwab (SCHW) and UnitedHealth (UNH) are also on Tuesday's docket.
More broadly, stocks are holding onto gains after chair Jerome Powell signaled the Federal Reserve is gearing up to start lowering rates soon, given recent solid inflation prints.
Retail sales came in flat but better than expected in June, data out Tuesday showed, adding to the easing in price pressures that have boosted faith in a September cut — a prospect that has already wakened wider bullishness for stocks beyond techs. Traders were pricing in a 100% likelihood the Fed will bring down borrowing costs that month, according to CME FedWatch data.
But some lawmakers have warned a Fed pivot before November's presidential election could be seen as a partisan move.
At the same time, political matters continued to preoccupy a market betting that former President Donald Trump is an even clearer front-runner for the White House after he survived an assassination attempt over the weekend. The Republican candidate's pick of Sen. J.D. Vance as his running mate is seen as strengthening his chances.
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Dow, S&P 500 add onto records as stocks open higher
US stocks moved higher on Tuesday, as investors assessed fresh big bank earnings and a surprise retail sales report — all while investors appear more and more confident that an interest rate cut is near.
The Dow Jones Industrial Average (^DJI) rose roughly 0.5%, after the blue-chip index topped 40,000 to notch an all-time closing high. The S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) were each up more than 0.3% on the heels of their own daily wins.
Retail sales come in better than expected in June
Retail sales were flat in June, defying Wall Street's prediction of a decline amid signs of slowing in the US economy.
Economists had expected a 0.3% decline in spending, according to Bloomberg data. Meanwhile, retail sales in May were revised higher to an increase of 0.3%, from a prior reading of 0.1%, according to Census Bureau data.
June sales, excluding auto and gas, grew by 0.8%, above consensus estimates for a 0.2% increase. The control group in Tuesday's release — which excludes several volatile categories and factors into GDP for the quarter — rose 0.9% in June, above estimates for a 0.2% gain.
"Although retail sales were unchanged in June, the strong 0.9% [month-over-month] rise in control group sales should ease concerns about the plight of the consumer in the wake of the renewed slump in sentiment," Capital Economics chief North America economist Paul Ashworth wrote in a note to clients. "Admittedly, both second-quarter consumption and GDP growth still appear to have been no better than 2% annualised, but the strong gain in June does set up for a better third quarter performance."
The high expectations on Netflix
Expectations on Netflix (NFLX) earnings later this week are on the high side, to say they very least. It makes sense as the company's business has clearly kicked into a new gear the past two quarters.
Even still, you have to wonder if expectations are TOO high and no matter what Netflix reports on Thursday, it will be seen as a letdown.
An example of what I am talking about is Jefferies analyst James Heaney, with this line in his earnings preview report this morning:
"We are raising our subscriber estimate for 2Q24 by ~18% to 5.8M net adds vs 4.9M previously and our fiscal year estimates to 28.3M."
