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Vladimir Zernov
U.S. Stock Market

The Market Ignores New Virus Containment Measures And Continued Deterioration In U.S. – China Relations

S&P 500 futures are mixed in premarket trading despite California’s decision to introduce new virus containment measures and additional deterioration in U.S. – China relations.

Facing a surge in the number of new coronavirus cases, California decided to shut bars and close indoor dining. In addition, the hardest-hit counties will have to close gyms, hair salons and churches.

Yesterday, this decision led to a massive reversal of S&P 500 during the trading session but this sell-off did not get any continuation.

Meanwhile, U.S. – China relations got a fresh blow after U.S. rejected China’s claims in the South China Sea, calling them “unlawful”. At this point, the market continues to ignore risks of a new round of U.S. – China trade war.

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Citigroup, JPMorgan and Wells Fargo Open The Earnings Season For Banks

Banks’ earnings are the main reason for market optimism this morning. Citigroup, JPMorgan and Wells Fargo have just provided their second-quarter reports.

JPMorgan reported earnings of $1.38 per share and increased its reserves by $8.81 billion. Analysts expected earnings of $1.23 per share.

Citigroup’s earnings were much better than expected at $0.50 per share compared to analyst consensus of $0.27 per share. Not surprisingly, Citigroup increased its reserves by $5.6 billion.

Wells Fargo reported a loss of $0.66 per share which was worse than the analyst consensus which called for a loss of $0.10 per share. The bank had to increase its reserves by $8.4 billion. In addition, Wells Fargo decided to cut its dividend by as much as 80%.

Citigroup and JPMorgan shares are up in premarket trading while Wells Fargo is under pressure which is not surprising given the massive dividend cut. The huge increase in reserves was expected given the current market situation. In my opinion, it’s a good start for the earnings season as stronger banks easily exceeded analyst expectations.

Inflation Rate Gets Back To The Positive Territory

The U.S. has just provided Inflation Rate and Core Inflation Rate reports for June. Inflation Rate increased by 0.6% month-over month in June compared to a decrease of 0.1% in May. On a year-over-year basis, Inflation Rate was also 0.6%.

Core Inflation Rate grew by 0.2% month-over-month. On a year-over-year basis, Core Inflation Rate increased by 1.2%.

Both Inflation Rate and Core Inflation Rate were a bit higher than expected which shows that customer activity has likely started to rebound in June.

For a look at all of today’s economic events, check out our economic calendar.

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