Tech Stocks Power Narrow Market Rally with Earnings from Regional Banks in Focus

Barry Adams
17 Jul, 2023
New York City

Market averages picked up pace after a slow start on Monday ahead of a busy week of corporate earnings. 

Investors are awaiting earnings this week from Tesla, Netflix, IBM, Bank of America, Morgan Stanley, Goldman Sachs and Las Vegas Sands.  

Regional banks have been in focus after the rise in interest rates have dented values of Treasury bonds held by banks and how banks are handling rising costs deposits. 

Many regional banks are expected to seek more capital from shareholders or access lending facilities set by the Federal Reserve. 

Investors are also awaiting earnings from regional banks including M&T Bank, Zions Bancorp, First Horizon National Bank, East West Bancorp and Associated Bancorp.  

Major averages climbed higher on hopes that the Federal Reserve will be able to engineer soft landing and avoid dipping the economy into a recession. 

Stocks advanced and built on the gains of previous two weeks in a row after three inflation reports confirmed cooling of inflation forces. 

Stronger-than-expected earnings from bank bolstered market advances last week and cooler-than-expected inflation raised hopes that the Federal Reserve may be able to engineer a soft landing of the economy and avoid a recession. 

Investors also reviewed weaker-than-expected second quarter GDP growth in China and mixed retail sales and fixed investment data in June. 

Copper and crude oil declined 1% and European markets fell as much as 1.3% following China's economic updates. 

Treasury yields edged slightly lower and investors assessed the U.S. economy's health and looked ahead to the rate decision after a two-day policy meeting ending on July 26. 

Market participants are anticipating the Federal Reserve to lift rates by 25 basis points, despite the cooling of overall inflation but core inflation remains stubbornly high and well above the Fed's target rate of 2%. 

The Federal Reserve signaled after the last rate decision that policymakers are looking to raise by 50 basis points before the year's end. 

 

U.S. Indexes & Yields 

The S&P 500 index traded higher 0.1% to 4,521.87 and the Nasdaq Composite futures edged up 0.9% to 14,232.68.

The yield on 2-year Treasury notes decreased to 4.74%, 10-year Treasury notes inched lower to 3.84% and 30-year Treasury bonds edged down to 3.92%. 

Crude oil decreased $0.81 to $76.10 a barrel and natural gas prices decreased 1 cent to $2.54 a thermal unit. 

 

Stock Movers 

United Airlines Holdings Inc edged slightly up to $53.88 after the company and the union representing pilots agreed to a pay hike of as much as 40% over the next four year. 

The preliminary agreement was announced on Saturday following a wage deal announced by Delta Air Lines a month ago. 

Tesla Inc soared 1.8% to $286.66 after the company said it built its first electric pick up truck dubbed "cybertruck" after a delay of two years. 

Ford Motor Company declined 0.9% to $14.85 after the company announced a price reduction of as much as $10,000 for its electric F150 pickup truck. 

Activision Blizzard jumped 4% to $93.60 after Microsoft and Sony reached an agreement to keep Activision's "Call of Duty" on Sony's PlayStation gaming console after the purchase by Microsoft. 

 

European Markets Turned Lower On China Growth Worries 

European markets fell on Monday following the weakness in metals and energy markets after China reported weaker than expected GDP growth data. 

Major averages declined between 0.5% and 1.4% in Paris, Frankfurt and London after China's GDP in the second quarter rose at a slower pace of 0.2% from the previous quarter. 

China also reported other economic data indicating weak economic recovery and investors are losing hopes of immediate stimulus measures. 

 

Europe Indexes & Yields

The DAX index decreased 0.2% to 16,068.65 16,103.98, the CAC-40 index dropped 1.1% to 7,291.66 and the FTSE 100 index decreased 0.4% to 7,406.42. 

The yield on 10-year German Bunds inched higher to 2.42%, French bonds traded lower to 2.98%, the UK gilts edged up to 4.38% and Italian bonds increased to 4.13%.

European currencies were stable after the dollar index declined 2% in the previous week and extended four month loss to 4%. 

The euro edged higher to $1.12, the British pound to $1.30 and the U.S. dollar fetched 85.87 Swiss cents

Crude oil prices eased after Libya resumed its production over the weekend. 

Brent crude decreased $1.45 to $78.41 a barrel and the Dutch TTF natural gas decreased €0.86 to €25.10 per MWh.

 

Europe Stock Movers

Mining and resource companies traded lower in London after China reported weaker-than-expected economic growth. 

Anglo American, Glencore, Antofagasta declined between 1.5% and 3% after crude oil prices declined 1% and copper fell 3%. 

Luxury stocks in Paris also declined following the weak retail sales growth in China.

Kering SA declined 1.9% to €490.70, Hermes International SCA dropped 3.9% to €1,916.80 and LVMH fell 4.2% to €854.30.  

Carlsberg SA declined 1.2% to €136.60 after the Russian government took control of its stake in a local brewery. 

UK home builders resumed the decline after the property listing platform Rightmove said that average newly listed property price declined by £905 to £371,907. 

Taylor Wimpey decreased 0.6% to 104.20 pence, Barratt Developments dropped 0.7% to 410.60 pence and Persimmon Plc fell 0.7% to 1,052.80 pence.   

Richemont SA plunged 9% to CHF 140.0 after the Swiss luxury company reported a decline in U.S. demand in its latest quarter. 

Sales in the first quarter ending in June rose 14% to €5.3 billion, or rose 19% in constant exchange rate. 

Sales in Europe increased 10% to €1.1 billion, in Asia Pacific soared 32% t0 €2.2 billion, Japan advanced 6% to €424 million, but fell 4% in the Americas to €1.1 billion. 

Entain Plc declined 1,262.0 pence after the UK-based company agreed to acquire the U.S.-based Angstrom Sports for £122 million or 160 million. 

 

China GDP Growth Slowed In June Quarter 

GDP in the second quarter rose 6.3% from a year ago and advanced faster than 4.5% in the first quarter, the National Bureau of Statistics  reported Monday. 

Retail sales rose 3.1% in June from a year ago, slower than 12.7% in May and industrial production advanced 4.4% compared to 3.5% in May. 

Private sector investment, a widely watched indicator for confidence in the private sector, declined 0.2% from a year ago in the six-month period to June, from 0.1% in the first five-month period ending in May.  

Fixed asset investment, the government's primary focus in ramping up infrastructure development, rose 3.8% from a year ago in the first six-month period to June, down from the growth of 4.0% in the five months to May.  

Jobless rate among the 16-24 age group jumped to a new high of 21.8% in June from 20.8% in May. 

Higher youth unemployment levels suggested weakening demand from the manufacturing sector.