Market Updates

U.S. Market Rally Enters Seventh Week, China Economic Data Confirms Slowdown

Alexander Garcia
15 Jul, 2024
Miami

    Market indexes extended gains for the seventh week in a row as investors geared for the next batch of earnings this week. 

    The S&P 500 index and the Nasdaq Composite advanced on Monday as the earnings season gathered momentum, and investors are hoping that a strong economic backdrop will provide support for earnings momentum. 

    Goldman Sachs reported better-than-expected quarterly results, and BlackRock said assets under management advanced in the second quarter, boosting market sentiment. 

    This week, investors are looking forward to quarterly results from more than 700 U.S. companies, including Charles Schwab, United Health, American Express, Blackstone, Novartis, and J&J. 

    The Russell 2000 index gained for the fourth day in a row as investors rotated out of large-cap tech stocks to smaller companies. 

    The small-cap focused stocks advanced 2% and extended this year's gain to 8.9%, still lagging the 19% increase in the S&P 500 index. 

     

    U.S. Indexes and Treasury Yields

    The S&P 500 index increased 0.6% to 5,650.28, and the Nasdaq Composite rose 0.8% to 18,540.77.

    The yield on 2-year Treasury notes edged lower to 4.497, 10-year Treasury notes increased to 4.22%, and 30-year Treasury bonds edged higher to 4.47%.

    WTI crude oil decreased $0.12 to $82.08 a barrel, and natural gas prices edged down 10 cents to $2.23 a thermal unit.

    Gold increased by $22.38 to $2,433.64 an ounce, and silver rose 15 cents to $30.92. 

    The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.10.

     

    U.S. Stock Movers 

    Goldman Sachs increased by 0.7% to $483.0 after the financial services company reported better-than-expected revenue and earnings in the second quarter. 

    The company reported revenue of $12.73 billion and pre-tax earnings per share of $8.62. 

    BlackRock declined 0.5% to $824.27, and the exchange-traded funds manager reported quarterly results that surpassed market expectations. 

    Super Micro increased 3.2% to $939.0, and the company is scheduled to be included in the Nasdaq 100 index before July 22. 

    Trump Media & Technology soared 52% to $47.23 after Sunday's assassination attempt on former president Donald Trump at a political rally in Pennsylvania. 

    Trump was released from the hospital, and the gunman was killed by the security service, but the gunman managed to fire multiple shots before he was killed by a secret service agent. 

    Alphabet declined 0.2% to $186.31, and the parent company of Google is in advanced talks to acquire cloud company Wiz for as much as $23 billion. 

    The news was first reported by the Wall Street Journal. 

     

    European Markets Turned Lower, Industrial Output Eased In May 

    European markets halted a three-day rally as investors reviewed global developments. 

    Benchmark indexes in Paris, London, and Frankfurt declined around 0.5% after China reported mixed economic data, and U.S. election uncertainty reached a new high after an assassination attempt on former president Donald Trump. 

    Closer to home, industrial output fell less than expected in May, Eurostat reported Monday. 

    Industrial output declined by 0.6% from the previous month in May, following a flat reading in the previous month. 

    On an annual basis, output decreased 2.9% in May from an upwardly revised 3.1% in April. 

     

    Europe Indexes and Yields

    The DAX index decreased by 0.4% to 18,676.88; the CAC-40 index fell by 0.7% to 7,673.76; and the FTSE 100 index rose by 0.4% to 8,224.75. 

    The yield on 10-year German bonds edged lower to 2.49%. French bonds inched lower to 3.15%; the UK gilts inched lower to 4.11%; and Italian bonds decreased to 3.77%.

    The euro edged lower to $1.09; the British pound inched higher to $1.29; and the U.S. dollar weakened to 89.36 Swiss cents.

    Brent crude decreased $0.14 to $84.89 a barrel, and the Dutch TTF natural gas rose by €0.39 to €31.18 per MWh.

     

    Europe Stock Movers

    The Swatch Group dropped 10.9% to CHF 169.60 after the Swiss watch group reported a sharp decline in sales and earnings in the first half due to a slowdown in China. 

    Burberry Group plunged 16.9% to 738.60 pence after the UK-based luxury group issued a profit warning and rehired its chief executive. 

    Luxury stocks in Paris declined after China reported mixed economic data and slower-than-estimated second-quarter economic growth of 4.7%. 

    LVMH, Kering, and Hermes declined between 2% and 4%. 

    Ericsson AB decreased 1.1% to SEK 70.10, and the Swedish telecom equipment maker signed a cross-licensing patent agreement with the China-based mobile handset maker Oppo. 

    Brunner Investment Trust increased 1.1% to 1,390.0 pence after the investment fund reported an increase in profit in the first half. 

    ME Group International PLC gained 0.5% to 182.68 pence, and the UK-based vending machine operator reported strong results in the six months ending in April. 

    BayWa plunged 33% to €15.18 after the Germany-based agriculture nutrition company said that the financially challenged company is seeking a restructuring opinion. 

    CompuGroup Medical decreased 0.1% to €15.97 after the German medical software company reported its second quarter results. 

     

    Japanese Market Indexes Expected To Trade Volatile Tracking Yen Turbulence 

    Benchmark indexes in Tokyo dropped sharply in Friday's trading after the yen jumped more than 3%. 

    The Nikkei 225 stock average and the Topix declined between 2% and 1%, respectively. 

    Financial markets are closed on Monday in Japan for a public holiday. 

    The suspected market intervention by the Bank of Japan and the ministry of finance lifted the battered yen to 157.85 against the U.S. dollar for the second session in a row. 

    Moreover, the Bank of Japan stepped up pressure on currency traders and conducted exchange rate verification for the euro-yen trade. 

    The Bank of Japan has been struggling to balance its government bond purchase plan while keeping the yen from falling rapidly. 

    However, mixed messages from the Bank of Japan policymakers exacerbated the yen weakness due to the wide yield differential between Japanese and U.S. government bonds. 

    Tech stocks were among the leading decliners in Friday's trading, following the weakness in the sector after investors rotated out to smaller company stocks in New York. 

     

    China Stocks Declined After Weak Economic Growth and Retail Sales Data 

    Amid cautious market sentiment, indexes in Shanghai and Hong Kong traded down after weaker-than-expected economic data. 

    The Hang Seng index plunged as much as 1.5%, and the CSI 300 index traded volatile but stayed closed to the flatline. 

    GDP growth in the second quarter fell short of market expectations, and a significant increase in retail sales in June showed persistent consumer demand weakness. 

    China's economy expanded at an annual pace of 4.7% in the second quarter, falling short of the market estimate of an increase of 5.1%, the National Bureau of Statistics reported Monday. 

    Growth in the second quarter slowed to 0.7% from the increase of 1.6% in the first quarter, due to persistent demand weakness amid a protracted property market slump. 

    In separate reports, the statistical agency said retail sales in June from a year ago rose 2.0%, slower than 3.7% in May, and industrial output growth slowed to an annual pace of 5.3% from 5.6% in May. 

    Property market weakness continues to hamper China's overall fixed-asset investment growth. 

    Fixed-asset investment increased 3.9% in the five-month period to May from a 4% annual pace in the period a year ago. 

    Property investment declined 10.1% in June, matching the rate in the previous month. 

    The weakness in the property market, compounded by the slowdown in retail sales and fixed-asset investment, is likely to keep the second-largest economy's growth in check and may miss the 5% annual growth target set by the government. 

    Moreover, China's urban jobless rate held steady at 5% in June, matching the rate in the previous month. 

    China's economic data, especially the job market update, are widely viewed with skepticism because local governments have fudged economic growth estimates for years. 

    Aggregate new home prices in the 70 largest cities in China declined 0.7% from the previous month in June and slowed to 0.71% in May, the National Bureau of Statistics reported Monday. 

    New home prices declined 4.5% from a year ago in June, accelerating from a 3.9% decline in the previous month. 

    Moreover, property prices declined for the 12th month in a row and dropped at the fastest pace since June 2015.

    Except for Shanghai, prices declined in all major cities across China. 

    However, existing home prices declined at a slower pace of 0.9% in June from the 1% fall in May, a separate report from the statistical agency showed. 

     

    China Stock Movers 

    The Hang Seng index decreased 1.5% to 18,021.19, and the CSI 300 index added 0.1% to 3,475.09. 

    Tech stocks led the decline in Hong Kong trading, and financial, industrial, and travel-related stocks were also among the decliners. 

    Baidu decreased 6% to HK $93.65, Tencent Holdings dropped 2% to HK $389.20, and Meituan fell 2.4% to HK $118.90. 

    Property stocks were also under pressure after property prices continued to decline in June and fixed-asset investment in the sector fell in June. 

    China Vanke decreased 2.2% to HK $4.66, China Resources Land declined 3.2% to HK $27.05, and Evergrande Property Services Group fell 4.2% to HK $0.68. 

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