With Rising Appetite for Stocks, Investors Step Up and Hit Buy Button

Barry Adams
19 Jul, 2023
New York City

Market averages traded higher and investors stepped up to buy bank stocks after deposit and bad debt worries receded. 

Stocks continued to retain upward bias and investors warmed up to bank stocks after regional and big banks reported earnings ahead of market expectations. 

Regional banks rallied after Western Alliance reported an increase in customer deposits, despite Bank of America, Citigroup and PNC Financial reporting a slight decline in average deposits in the quarter. 

Investors are increasingly taking a positive view of market performance this year and forecasting the delaying of economic slowdown. 

Investors are hoping that market gains in the second half may surpass previous expectations because of improving economic trends and better-than-feared earnings picture. 

Slowing inflation, resilient consumer spending, muted wage growth, better-than-expected corporate earnings and receding stress in the regional banking system are contributing to positive market sentiment. 

On the positive side, overall inflation has fallen sharply after energy prices plunged from the previous year's high  but core inflation, which largely represents service inflation, still remains stubbornly high. 

Investors are also hoping that the Federal Reserve is nearing its rate hike regime and the strength in the labor market will prevent the economy from falling into a recession. 

In domestic economic news, seasonally adjusted housing starts declined 8% from the previous month to 1.434 million, the U.S. Census Bureau reported Wednesday. 

Single family home starts declined 7% to 935,000 and multi-family unit starts fell 11.6% to 482,000.   

Building permits in June were at 1.44 million, a decline of 3.7% from the revised May rate of 1.496 million and 15.3% below the annual rate of 1.701 million in June 2022.

Housing starts in June were 1.434 million and 8.0% below the revised May estimate of 1.559 million and 8.1% below the revised rate of 1.561 million in June 2022.   

Home completions declined to 1.468 million, 3.3% below the revised May estimate of 1.518 million but 5.5% higher than the June 2022 rate of 1.39 million.   

 

U.S. Indexes & Yields 

The S&P 500 index traded higher 0.2% to 4,564.29 and the Nasdaq Composite futures edged down 0.1% to 14,341.96. 

The yield on 2-year Treasury notes decreased to 4.77%, 10-year Treasury notes inched lower to 3.76% and 30-year Treasury bonds edged down to 3.86%. 

Crude oil increased $0.46 to $76.17 a barrel and natural gas prices decreased 0,1 cents to $2.61 a thermal unit. 

 

Stock Movers 

Goldman Sachs Group Inc declined 0.3% to $336.85 after the company reported lower-than-expected adjusted quarterly earnings because of losses in real estate and GreenSky. 

The financial services company reported quarterly revenue of $10.9 billion and earnings of $1.22 billion or $3.06 a share, reflecting sharp decline in trading revenue and investment banking fees.  

Carvana Company soared 30.1% to $52.36 after the used automobile retailer said it struck a deal to lower its debt by $1.2 billion. 

The company said the deal will eliminate about 80% of its unsecured notes in 2025 and 2027. 

Joby Aviation Inc plunged 12.2% to $8.88 after JPMorgan Chase lowered its stock rating to "underweight" from "neutral" and analyst Bill Peterson added in a client note that the adoption of electric aircraft "will take much longer than currently embedded in bullish expectations."

Oddity Tech shot up 40% to $49.10 after the beauty company sold 12.1 million shares at $35 a share in an initial public offering. 

Apple Inc popped 0.6% to $194.27 on a speculation that the company is looking to develop its own AI tools similar to ChatGPT and other chat based services. 

 

European Markets Closed Higher After Inflation Data 

European markets edged up after latest inflation data confirmed cooling trends of the last nine months. 

Market averages in London, Paris and Frankfurt advanced after the consumer price inflation in the Euro Area confirmed at 5.5% in June, the lowest since January 2022. 

However, the core rate of inflation accelerated to 5.5% in the month from 5.4% in the preliminary estimate released by Eurostat. 

Overall inflation declined because of a sharp decline in energy prices compared to a high level a year ago but core rate of inflation, which excludes volatile energy and food prices, stayed near the peak of 5.7%. 

Service sector inflation rose to 5.4% from the previous estimate of 5.0%, indicating deeply entrenched inflation in the economy. 

The elevated core inflation supported the European Central Bank's case of raising rate higher because the inflation rate is still well above the target rate of 2%. 

 

UK Consumer Inflation Eased In June, Core Inflation Remained Elevated

Consumer prices in the UK declined to 7.9% in June, the lowest level since March 2022, the Office for National Statistics reported Wednesday. 

Core inflation, which excludes food and energy prices, eased to 6.9% from a three-decade peak of 7.1%. 

Despite the slight easing of inflation, core and overall inflation remains well above the Bank of England's target rate of 2% and supports the case for higher rates at the next meeting of policyholders. 

 

European Passenger Vehicle Sales Rebounded In June 

European markets traded higher after slowing inflation trends lifted market sentiment. 

Passenger car registration in the European Union increased 17.8% in June to one million units, the European Automobile Manufacturers Association reported Wednesday. 

Passenger vehicle sales rose for the 11th month in a row with sales in rising in Germany by 24.8%, Spain by 13.3%, and France by 11.5%.  

Battery powered electric vehicles sales rose 66% to 158,300 units, accounting for 15% of total sales. 

Despite the improving trend, passenger vehicle sales are still down 21% from pre-Covid sales in 2019 in the comparable period.   

 

Europe Indexes & Yields

The DAX index decreased 0.1% to 16,108.93, the CAC-40 index advanced 0.1% to 7,326.94 and the FTSE 100 index increased 1.8% to 7,588.20. 

The yield on 10-year German Bunds inched higher to 2.33%, French bonds traded lower to 2.88%, the UK gilts edged up to 4.19% and Italian bonds increased to 3.99%.

The euro edged higher to $1.12, the British pound to $1.29 and the U.S. dollar fetched 85.85 Swiss cents

Brent crude decreased $0.23 to $79.86 a barrel and the Dutch TTF natural gas decreased €1.27 to €25.80 per MWh.

 

Europe Stock Movers

Resource and mining stocks extended gains this week after crude oil prices and copper prices rebounded. 

Glencore, Antofagasta, and Anglo American advanced between 1% and 2%. 

Kering SA jumped 5.5% to €521.20 after the company reshuffled management structure. 

Luxury stocks rebounded after three days of weakness in Paris trading. 

LVMH, Hermes and Richemont SA gained between 1% and 2.5% and Dassault Systems, Capgemini and Michelin jumped more than 1%. 

However, Publicis Groupe, Schneider Electric and ArcelorMittal dipped down 1%. 

In Frankfurt trading, Siemens Healthineers,  Zalando, Vonovia and Sartorius gained between 1% and 2%. 

Volvo AB declined 0.2% to 223.30 Swedish krona after the commercial vehicle maker reported higher sales and earnings in its latest quarter but orders declined. 

Net sales in the quarter increased 18% to 140.80 billion kronor from 118.9 billion kronor  and net income rose to 10.82 kronor from 10.52 kronor and earnings per share increased to 5.30 kronor from 5.14 kronor a year ago.  

New truck orders in the quarter declined 10% to 48,300 units but deliveries in the period rose 5% to 68,300 units.