U.S. Equity Markets Rise Sharply Ahead of Corporate Earnings Season

U.S. Treasury yields did an about face from Friday’s poor performance to close higher as global fears surrounding the US-China trade dispute dissipated. News that the United Kingdom reached a compromise with the European Union also helped drive yields higher.
James Hyerczyk
U.S. Equity Markets
U.S. Equity Markets

The major U.S. stock indexes closed sharply higher on Monday as investors shrugged off concerns over the lingering trade dispute between the United States and key trading partners, namely China and the European Union.

In the cash market, the benchmark S&P 500 Index settled at 2784.17, up 24.35 or +0.88%. The blue chip Dow Jones Industrial Average finished at 24776.59, up 320.11 or +1.31% and the tech-driven NASDAQ Composite ended the session at 7755.45, up 67.06 or +0.87%.

The S&P 500 Index was led higher by the financial sector which rose 2.3 percent. Bank stocks performed well, jumping nearly 2.5 percent, led by Bank of America, Citigroup, Goldman Sachs and J.P. Morgan Chase. The Dow Jones Industrial Average was driven higher by shares of J.P. Morgan Chase, Goldman Sachs and Caterpillar. Amazon, Netflix and Apple carried the NASDAQ Composite.

One catalyst behind the rally was last Friday’s positive jobs data. The report seemed to make investors forget about the start of another round of fresh tariffs by the U.S. on China.

Another catalyst was anticipation of the start of the corporate earnings season. Traders are expecting it to be strong and maybe even stronger than the first quarter. According to FactSet, S&P 500 earnings for the second quarter are estimated to have grown 20 percent. The season will kick-off with reports from Citigroup, J.P. Morgan Chase and Wells Fargo.

U.S. Treasury Markets

U.S. Treasury yields did an about face from Friday’s poor performance to close higher as global fears surrounding the US-China trade dispute dissipated. News that the United Kingdom reached a compromise with the European Union also helped drive yields higher.

The yield on the benchmark 10-year Treasury note rose to 2.858, while the yield on the 30-year Treasury bond settled near 2.964.

U.S. Economic Data

It was a light day as far as economic data was concerned. U.S. Consumer Credit came in at 24.6 billion, beating the 12.2 billion estimate. The previous report was revised higher to 10.3 billion. The rise in consumer credit was the most in six months on more credit-card debt outstanding and non-revolving loans, Federal Reserve figures showed Monday.

The increase in revolving debt shows consumers were spending more freely midway through the second quarter. The rise in non-revolving partly reflects steady motor-vehicle sales.

Traders said the results signal a modest acceleration in second-quarter spending amid recent tax cuts and a robust labor market. However, moderate wage gains as seen in last Friday’s jobs report may be limiting household use of credit cards.

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