Tech Powered Rally On Wall Street

Barry Adams
21 Jul, 2022
New York City

Benchmark indexes on Wall Street lacked direction after trading near 6-week highs as investors digested the latest earnings from home builders and transportation companies. 

Tech stocks advanced in the early afternoon trading lifting the two popular benchmark indexes. 

The S&P 500 index fell 0.99% to 3,999.10 and the Nasdaq Composite index rose 1.4% to 12,059.20. 

The Nasdaq advanced for the third day in a row after Tesla jumped nearly 10%. 

Apple, Amazon, Alphabet, Meta, and Netflix jumped between 0.3% and 3%. 

Futures of crude oil declined $3.49 to $96.39 a barrel and natural gas fell 8 cents to $7.92 a unit.  

Jobless claims at the end of last week rose to the highest level since mid-November last week. 

Initial claims of weekly jobless claims increased 7,000 to 251,000 for the week ended July 16 from the previous week, a high not seen since the week ending November 13, 2021. 

Continuing claims, which runs a week behind, rose to 1.384 million, the highest total since April 23.  

Heatwave in the U.S. and Europe lifted prices of natural gas in the volatile session but closed down and Russia resumed its natural gas supply to Europe through Nord Stream 1 pipe network. 

The yield on 10-year Treasury notes edged lower to 2.906% and the yield on German government 10-year Bund hovered near 1.215% after the European Central Bank lifted rates for the first time in eleven years. 

The yield on Japanese government bonds were nearly unchanged after the Bank of Japan left its key lending rate unrevised at 0.25%.  

D.R. Horton fell 3.8% to $75.87 after the home builder said June quarter sales increased 21% to $8.8 billion and net income surged 48% to $1.6 billion or $4.67 a share from a year ago. 

The home builder also lowered its full-year outlook on moderating demand to a range between $33.8 billion to $34.6 billion and complete between 83,000 and 85,000 homes. 

The company had previously guided annual revenues to fall between $35.3 billion to $36.1 billion and complete between 88,000 and 90,000 homes. 

American Airlines Group declined 7.4% to $14.08 after the company reported its first quarterly profit since the start of the pandemic. 

The airline reported record second quarter revenue of $13.4 billion, a 12.2% increase over the same period in 2019 on 8.5% less capacity.

Second quarter net income was $476 million or $0.68 per diluted share.

Carnival Corp dropped 10.9% to $9.90 after the cruise line operator planned a $1 billion common stock offering to finance general corporate expenses. 

Tesla Inc gained 9.7% to $814.93 after the electric vehicle maker reported quarterly sales jumped 42% and net income doubled from a year ago. 

 

First Rate Hike in Eurozone After 11 Years

European markets traded mixed after the central bank lifted rates for the first time in eleven years and Italian political turmoil deepened. 

The DAX index eased 0.17% to 13,257.90, the CAC-40 index rose 0.6% to 6,220.59, and the FTSE 100 index decreased 0.4% to 7,234.52.  

The European Central Bank lifted its key lending rate by 50 basis points to cool rapidly advancing inflation in the currency zone of 19 nations. 

The governing council lifted the rates more than the 25 basis points of increase  expected by traders and economists. 

With the latest increase, the key lending rate is zero and the central bank had previously signaled rate hikes at the next meetings in July and September. 

The deposit rate is now set at zero, the main refinancing rate at 0.50%, and  the marginal lending facility is 0.75%. 

The euro strengthened after the rate decision to $1.0245. 

 

Italy's Political Turmoil Deepens 

Italian Prime Minister Mario Draghi resigned for the second time in as many weeks after winning the confidence vote boycotted by three coalition partners. 

Draghi decided to resign after three coalition partners - the center right parties The League and Forza Italia and the populist 5-Star Movement - withdrew its support to the 17-month old national unity government..  

Draghi will continue as a "caretaker" prime minister until the president Sergio Mattarella decides next steps. 

Italy is most likely to head to a general election as early as September delaying the annual budgetary process and the release of the European Union's $20 billion pandemic aid. 

For a week, Prime Minister Draghi worked with different factions in his National Unity government but failed to resolve differences on how to allocate government expenses and help struggling families and businesses. 

Two weeks ago, taxi unions across the nations held protests against the Draghi's plan to open up the industry to more competition. 

Despite the unprecedented outpouring of public support for Draghi's leadership, a series of pro-Draghi rallies by some 1,000 mayors across the nation and a unified support offered by the leading newspapers, three coalition partners pulled their support.