US Stock Market Overview – Stocks Hit Record, Citigroup Beats

China reports soft GDP
David Becker
Businessmen looking at market charts

US stocks were mostly higher on Monday with all three major indices closing at all time highs. The Russel 2000 bucked the trend settling in the red. Sectors were mixed, with Utilities outperforming, energy shares finished in the red. Financial shares finished the session in the red despite a beat in financial results from banking giant Citigroup.

Citigroup Beat

Citigroup was the first major bank to release financial results on Monday, with a beat. The solid results were bolstered by a jump in fixed income trading, cost-cutting and a one-time gain on Tradeweb’s public offering. The financial giant reported Q2 diluted earnings of $1.95 per share, with earnings boosted by a one-time pre-tax gain. On an unadjusted basis, the bank earned $1.83 per adjusted share, on $18.8 billion in revenue, compared to the comparable year ago’s results of $1.63 per share on $18.5 billion. Expectations were for Citi to post $1.80 per share on $18.5 billion in revenue.

Additionally, Citi reported that revenues rose 2% from the second quarter of 2018, helped by a $350 million pre-tax gain on its investment in electronic trading platform Tradeweb, which went public recently. Global consumer banking saw a 3% gain, while operating expenses declined by 2%, led by winding down of legacy businesses. Additionally, the bank saw higher revenue from fixed income trading and consumer banking, which helped counterbalance an expected drop in investment banking and equity trading activities.

Uptick in Inflation offsets Dovish Fed

The dovish commentary from Fed Chair J Powell on Wednesday and Thursday last week, weighed on US yields and allowed the dollar to ease. This paved the way for higher gold prices. This was somewhat offset by stronger than expected consumer prices released by the labor department on Thursday. Core CPI rose to the highest levels in 18-months which helped buoy US yields. US yields have increased approximately 15-basis points since the beginning of July, and could move higher as speculation of future interest rate cuts increase.

Chinese GDP Slows to Lowest Rate in 25-years

China reported GDP 6.2% in the Q2 of 2019 which was the weakest quarterly increase in 25-years. This follows a Q1 GDP of 6.4%. Industrial production increased by 6.3% year-over-year after the 5.0% increase in May. Retail sales increased to 9.8% from 8.6% year-over-year, and fixed asset investment rose 5.8% from 5.6%.

The weakness will likely be met with additional monetary policy accommodation. The question is whether trade tensions will resume generating a further drag on economic growth. There was a report from Reuters that US companies may not get the licenses to sell to Huawei for another month. At the same time China has not stepped up its purchases of US agriculture.

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