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S&P 500 Index Posts Best Close Since February, Dow Finishes Over 25,000

James Hyerczyk
With just over 5 percent of S&P 500 companies reporting thus far, earnings growth is up 16.37 percent. U.S. import prices fell the most in more than two years in June. U.S. consumer sentiment hit a six-month low as tariff worries more than doubled, dampening optimism over the economy. The preliminary data showed that consumer sentiment fell to 97.1, its lowest level since January. The Federal Reserve said Friday it expects low unemployment and rising inflation will keep it on track to raise interest rates at a gradual pace over the next two years. Finally, Atlanta Fed President Raphael Bostic said Friday he favors one more interest-rate hike this year, given current economic conditions.

The major U.S. stock indexes closed higher on Friday to cap a stellar week. Investors once again shrugged off concerns over the escalating trade dispute between the United States and China, while shifting their focus on second-quarter earnings and revenue reports.

In the cash market, the benchmark S&P 500 Index closed at 2801.31, up 3.02 or +0.11%. The blue chip Dow Jones Industrial Average settled at 25019.41, up 94.52 or +0.38% and the tech-driven NASDAQ Composite finished at 7827.69, up 3.77 or +0.05%.

The S&P 500 Index posted its highest closing level since early February, led by a strong performance in technology stocks and a slight recovery in the energy sector.

Both the NASDAQ Composite and the S&P 500 Index were boosted by solid gains in Facebook, Amazon and Microsoft, which rose 0.2 percent, 0.9 percent and 1.2 percent respectively.

The Dow Jones Industrial Average was underpinned by a strong performance in United Technologies and Walgreens Boots Alliance. It also closed above 25,000 for the first time since June 15.

As far as earnings were concerned, a pair of bank stocks posted mixed results. J.P. Morgan Chase posted better-than-expected earnings and sales, as its trading revenue rose 13 percent in the second quarter on a year-over-year basis. Citigroup, posted a stronger-than-expected profit, but its revenue for the quarter missed. Wells Fargo took a hit on both earnings and revenue.

Finally, with just over 5 percent of S&P 500 companies reporting thus far, earnings growth is up 16.37 percent. Still below the 20 percent estimate.

U.S. Economic News

U.S. import prices fell the most in more than two years in June as prices for petroleum products fell and a strong dollar weighed on the cost of other goods. The Labor Department said import prices dropped 0.4 percent last month, the largest decline since February 2016, after jumping 0.9 percent in May. Economists were looking for import prices to edge up 0.1 percent in June.

Economists also said the unexpected drop in import prices was likely temporary given tariffs imposed by the Trump administration on lumber, steel and aluminum imports to protect domestic industries from what it says is unfair foreign competition.

According to the University of Michigan’s Consumer Survey Center, U.S. consumer sentiment hit a six-month low as tariff worries more than doubled, dampening optimism over the economy. The preliminary data showed that consumer sentiment fell to 97.1, its lowest level since January, from 98.2 a month earlier. Traders and analysts were looking for a drop to 98.1.

The survey’s chief economist Richard Curtin indicated that although sentiment dropped in early July, it still “remained nearly equal to the average in the prior twelve months (97.7) and since the start of 2017 (97.4).

In another report, the Federal Reserve said Friday it expects low unemployment and rising inflation will keep it on track to raise interest rates at a gradual pace over the next two years. By late 2019, the Fed says its key policy rate should be at a level that will be slightly restrictive for growth.

Finally, Atlanta Fed President Raphael Bostic said Friday he favors one more interest-rate hike this year, given current economic conditions.

“I favor one more move as things currently stand,” Bostic said during a talk at the Northern Chapter Virginia Society of Certified Public Accountants in Falls Church, Virginia.

This article was originally posted on FX Empire

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