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S&P 500 Notches Another Record 07/15 16:20
A wobbly day of trading ended with meager gains for U.S. stock indexes on
Monday, enough to nudge them further into record territory, as the curtain rose
on what's expected to be the weakest earnings reporting season in years.
NEW YORK (AP) -- A wobbly day of trading ended with meager gains for U.S.
stock indexes on Monday, enough to nudge them further into record territory, as
the curtain rose on what's expected to be the weakest earnings reporting season
in years.
Financial stocks fell even though Citigroup said it made more money last
quarter than analysts expected. Energy stocks were also weak, but gains for
technology and health care stocks helped tip the S&P 500 and other indexes past
the highs set on Friday.
The S&P 500 rose 0.53 points, or less than 0.1%, to 3,014.30 after drifting
between a gain of 0.1% and a loss of 0.2% earlier in the day. The Dow Jones
Industrial Average gained 27.13, or 0.1%, to 27,359.16, and the Nasdaq
composite added 14.04, or 0.2%, to 8,258.19.
Stocks have jumped since early June on increasing expectations that the
Federal Reserve will cut interest rates to help the economy, and investors are
virtually certain that it will happen at the next Fed meeting at the end of
this month. The only question, investors say, is how deeply the Fed will cut
when it lowers rates for the first time in a decade.
Until then, the main drivers for the market will likely be the hundreds of
earnings reports scheduled to come from big companies, showing how much profit
they made from April through June. "It's waiting for this really all important
second-quarter earnings season to heat up," said Thomas Martin, senior
portfolio manager at Globalt Investments.
Expectations are generally dim, and Wall Street is forecasting a 3% drop in
earnings per share for S&P 500 companies from a year ago. That would mark the
first back-to-back drop in three years, according to FactSet. This week,
roughly a fifth of the companies in the S&P 500 are set to report their
second-quarter results.
Citigroup was one of the reporting season's early headliners, but its stock
initially fell as much as 2.4% after reporting better-than-expected results.
Its stock recovered as the day progressed, and it ended Monday down only 0.1%.
Other banks, though, didn't have as strong a recovery, and financial stocks
in the S&P 500 dropped 0.5% for the second-sharpest loss among the 11 sectors
that make up the index. JPMorgan Chase, which will report its second-quarter
results on Tuesday, fell 1.2% and was the biggest individual drag on the S&P
500.
Every earnings reporting season, companies usually turn in results that top
analysts' expectations. That may be even easier to do this time around, with
analysts forecasting the worst drop in quarterly earnings for the S&P 500 in
three years at 3%, according to FactSet.
"The bar for corporate earnings has been set quite low, and we don't think
it will take much to surprise on the upside," said Jon Adams, senior investment
strategist at BMO Global Asset Management.
That's why he said he'll be paying close attention to which companies are
able to grow their revenues despite the stronger dollar and weakening economic
trends around the world, and not just which companies are beating earnings
forecasts. He's also focusing on companies able to keep their profit margins
high, when wage growth for workers at many companies is starting to nudge
higher.
Several economic reports are also on the schedule this week, including
updates on retail sales, the housing industry and shoppers' confidence. The
U.S. economy has generally remained solid, but investors don't expect this
week's reports to alter the direction of the Fed, which has already given hints
about rate cuts given weakening economic trends around the world.
The White House's repeated threats to raise tariffs has made companies at
home more hesitant and hurt trade internationally. They're a big reason that
China on Monday reported its weakest quarter of economic growth in at least 26
years.
"You could make a case that the Fed shouldn't need to cut in this market,
but they've clearly prepared the market for a cut," said Adams.
Energy stocks fell 0.9% Monday for the sharpest drop among the 11 sectors
that make up the S&P 500. Lower prices for oil and natural gas dented shares
across the industry.
Benchmark U.S. crude fell 63 cents to settle at $59.58 per barrel. Brent
crude, the international standard, lost 24 cents to $66.48 a barrel. Natural
gas dropped 5 cents to $2.41 per 1,000 cubic feet, heating oil fell 3 cents to
$1.95 per gallon and wholesale gasoline lost 5 cents to $1.93 per gallon.
The price of gold edged up $1.30 to $1,413.50 an ounce, silver rose 13 cents
to $15.29 an ounce and copper rose 2 cents to $2.71 a pound.
The yield on the 10-year Treasury dipped to 2.08% from 2.10% late Friday.
The two-year Treasury yield, which is more affected by expectations of Fed rate
moves, held steady at 1.83%.
In markets abroad, the FTSE 100 in London rose 0.3%, France's CAC 40 inched
up 0.1% and Germany's DAX added 0.5%. South Korea's Kospi slipped 0.2%, and the
Hang Seng in Hong Kong rose 0.3%.
The dollar inched up to 107.90 Japanese yen from 107.81 late Friday. The
euro slipped to $1.1259 from $1.1271, and the British pound fell to $1.2520
from $1.2572.
(BE)
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