Large Caps and Tech Stocks Lead Market Averages Higher

Barry Adams
25 Jul, 2023
New York City

Stocks traded higher after earnings dominated the news cycle and investors looked for signs of looming recession and slowing inflation. 

Market averages traded higher as most companies met or exceeded lowered earnings expectations. 

The Dow Jones Industrial Average closed higher for the 12th day in a row, the longest stretch since February 2017. 

large companies have outperformed broader market indexes so far as investors sought safety in size in the face of a looing recession and rising interest rates. 

Tech stocks led the charge and after the bell Alphabet reported better-than-expected earnings on the strength in its cloud segment and Microsoft generally met earnings expectations. 

General Motors, General Electric and Verizon reported rising sales and earnings and stable operating margins, supporting the case of a healthy economic environment for large companies. 

Investors are looking ahead to policy decisions from the Federal Reserve Bank, the European Central Bank and the Bank of Japan. 

The Fed and the ECB are widely expected to raise rates by at least 25 basis points and the Bank of Japan is expected to keep its ultra-loose policy intact despite steady rise in inflation in recent months. 

Crude oil traded at a new 3-month high and natural gas edged higher after China pledged more stimulus measures to support faltering economic momentum and depressed property market. 

Copper traded up 2% to $3.93 per pound on the hopes of China measures spurring additional demand. 

 

IMF Revised Higher World Economic Growth Outlook

The IMF revised higher its outlook for the world economy and raised its growth projection to 3% from the previous estimate of 2.8% released in April. 

The multilateral agency lowered its inflation outlook to 6.8% in 2023 and 5.2% in 2024 and noted a slower decline in core rate of inflation. 

The IMF estimated the U.S. economy to grow 1.8% in 2023 and 1% in 2024 and in the Euro Area growth in 2023 is expected to be at 0.9% and accelerate to 1.5% in 2024. 

China is expected to grow 5.2% as the country struggles with the uneven economic recovery after the ending of Covid restrictions and Japan is expected to achieve a moderate rise of 1.5%. 

 

U.S. Indexes & Yields 

The S&P 500 index traded higher 0.3% to 4,567.46 and the Nasdaq Composite futures edged up 0.6% to 14,144.56. 

The yield on 2-year Treasury notes decreased to 4.89%, 10-year Treasury notes inched lower to 3.89% and 30-year Treasury bonds edged down to 3.93%. 

Crude oil decreased $0.25 to $78.49 a barrel and natural gas prices decreased 1 cent to $2.69 a thermal unit. 

 

Stock Movers 

General Motors declined 3.2% to $38.09 despite the automaker lifting its full-year earnings outlook. 

The company revised full-year earnings outlook to between $12 billion and $14 billion, from the previous range between $11 billion and $13 billion. 

The automaker also reported sharply higher second quarter earnings from a year ago. 

3M Company rose 4.6% to $109.26 after the diversified company reported better-than-expected quarterly earnings and the company reiterated its annual sales outlook and revised higher its annual earnings estimate. 

Verizon Communication Inc decreased 0.3% to $33.85 after the company reported mixed quarterly results.

Revenue in the quarter increased to $32.6 billion and earnings per share excluding one-time items was $1.21.

General Electric Company increased 4.5% to $115.57 after the engineering company reported stronger-than-expected quarterly earnings. 

The company also lifted its full-year earnings outlook on the strong demand for its engines and products in the aerospace division and record orders in its renewable energy business. 

Xerox Holdings Corp soared 9.2% to $16.93 after the workspace technology provider reported second quarter earnings ahead of market expectations. 

Alaska Air Group, Inc dropped 10.6% to $47.68 despite the regional airline reporting better-than-expected revenue and earnings. 

The airline reported second quarter revenue of $2.84 billion and adjusted earnings per share of $3 and guided full-year earnings per share between $5.50 and $7.50 a share.  

 

European Markets Advanced In Cautious Trading 

European markets traded slightly higher as investors awaited rate decisions this week and reacted to corporate earnings. 

Investors are looking ahead to policy decisions from the Federal Reserve Bank, the European Central Bank and the Bank of Japan. 

The Fed and the ECB are widely expected to raise rates by at least 25 basis points and the Bank of Japan is expected to keep its ultra-loose policy intact despite steady rise in inflation in recent months. 

Crude oil traded at a new 3-month high and natural gas edged higher after China pledged more stimulus measures to support faltering economic momentum and depressed property market. 

Copper traded up 2% to $3.93 per pound on the hopes of China measures spurring additional demand. 

Hong Kong stocks soared 4% on the hopes of more measures to revive the flagging property market. 

German business confidence deteriorated for the third month in a row in July, the Ifo Institute survey showed today.  

The business climate index decreased to 87.3 in July from 88.6 in the previous month, a decline for the third month in a row. 

 

Europe Indexes & Yields

The DAX index increased 0.2% to 16,211.59, the CAC-40 index fell 0.2% to 7,415.50 and the FTSE 100 index gained 0.1% to 7,691.82. 

The yield on 10-year German bonds decreased higher to 2.43%, French bonds traded lower to 2.99%, the UK gilts edged down to 4.28% and Italian bonds increased to 4.08%.

The euro edged higher to $1.10, the British pound to $1.28 and the U.S. dollar fetched 86.99 Swiss cents

Brent crude increased $0.72 to $83.46 a barrel and the Dutch TTF natural gas increased €2.04 to €32.65 per MWh.

 

Europe Stock Movers

China's pledge to support the property sector after the Politburo meeting chaired by Xi Jinping, lifted commodities prices. 

Antofagasta, Glencore and Anglo American advanced between 2% and 4%. 

UBS Group AG increased 1.2% to CHF 18.24 and the Swiss banking giant was fined $400 million by regulators in Switzerland, U.S. and U.K. for misconducts of Credit Suisse, acquired by the bank in June.  

Unilever Plc jumped 4.8% to 4,213.0 pence after the consumer products company reported better than expected sales in its latest quarter. 

Ashtead Group Plc dropped 0.5% to 5,560.0 pence after the company priced its 5.95% senior notes worth $750 million. 

Bayer AG declined 3.8% to $13.87 after the German chemical company lowered its fiscal year 2023 outlook and cited deteriorating macroeconomic outlook.  

Dassault Systemes SE declined 3.9% to €38.50 after the French software company reported weaker-than-expected revenue growth in its latest quarter. 

Remy Cointreau SA increased 3.8% to €151.90 after the company reiterated its fiscal 2024 outlook. 

Thales SA declined 0.5% to €131.70 after the French defense company agreed to acquire cyber security company Imperva for $3.6 billion.