Better-than-expected earnings from a major bank eclipsed weak retail sales numbers, guiding benchmarks to a finish in the green on Monday. The S&P 500 moved higher for the eighth consecutive day. A number of domestic reports were released yesterday. The NY Empire State Index jumped surprisingly in the month of July. Meanwhile, business inventories increased marginally in May. On the international front, China’s GDP declined in the second quarter. The utilities sector was the biggest gainer among the S&P 500 industry groups. Consumer discretionary stocks had a bad run yesterday.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (:DJI) gained 0.1% to close the day at 15,484.26. The S&P 500 added 0.1% to finish yesterday’s trading session at 1,682.50. The tech-laden Nasdaq Composite Index rose 0.2% to end at 3,607.49. The fear-gauge CBOE Volatility Index (:VIX) declined 0.4% to settle at 13.79. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 4.91 billion shares, significantly below 2013’s average of 6.4 billion shares. Advancing stocks outnumbered the decliners. For the 64% that advanced, only 34% declined.
Recently, stocks are moving higher banking on the encouraging starts to quarterly results and Ben Bernanke’s assurance on the stimulus program. The S&P 500 and the blue-chip index finished at record highs for three consecutive days. The S&P 500 has gained 18% from December 31 last year till date, primarily driven by the central bank’s bond buying program. Investors will now focus on Federal Reserve Chairman Ben Bernanke’s Congressional testimony later this week.
On the earnings front, Citigroup Inc (NYSE:C), the third-biggest bank by assets reported second quarter results. The company’s earnings surpassed analyst expectations. Shares rose nearly 2% after the declaration of results yesterday. Quarterly profit jumped 42% boosted by an increase in revenue from bond trading and robust home prices which decreased losses on mortgages. Citigroup’s better-than-expected earnings follows strong reports from JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) on Friday. According to Thomson Reuters data, analysts are expecting S&P 500 companies to post earnings and revenue growth of 2.8% and 1.5%, respectively compared to the year-ago period.
On the home front, a number of domestic reports were released yesterday. According to the Commerce Department, retail sales increased 0.4% in June following a 0.5% increase in May. This was well below the consensus estimate of an increase of 0.8%. Retail trade sales edged up 0.6% in June. The rise in retail sales were primarily driven by higher auto sales. U.S. business Inventories rose 0.1% in May. This was in line with the consensus estimate.
According to the Federal Reserve Bank of New York, manufacturing activity rose in July. The general business conditions index jumped to 9.46 from the previous month’s figure of 7.84. This was well above the consensus estimate of 5.9. The new orders and shipments index climbed to 3.8 and 9.0 respectively.
On the international front, China’s GDP declined to 7.5% in the second quarter from 7.7% in first quarter. China’s second quarter GDP was in line with analysts’ expectations. The country’s second quarter GDP declined on weak foreign demand. The government's official growth target for this year is 7.5%.
The utilities sector was the biggest gainer among the S&P 500 industry groups and the Utilities SPDR (XLU) gained 1.6%. Stocks such as Public Service Enterprise Group Inc. (NYSE:PEG), NRG Energy Inc (NYSE:NRG), Exelon Corporation (NYSE:EXC), Duke Energy Corp (NYSE:DUK) and Wisconsin Energy Corporation (NYSE:WEC) gained 2.3%, 1.5%, 1.6%, 1.2% and 1.5%, respectively.
Consumer Discretionary stocks had a bad day yesterday and the Consumer Discretionary SPDR lost 0.3%. Stocks such as The Walt Disney Company (NYSE:DIS), Amazon.com, Inc. (NASDAQ:AMZN), McDonald's Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX) and Time Warner Inc (NYSE:TWX) decreased 1.6%, 0.3%, 0.8%, 0.1% and 0.5%, respectively.
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