Stocks Start The Week Bullish About Earnings

Stocks continued their advance on Monday, as those willing to try their luck making wagers in anticipation of quarterly earnings reports stepped up to embrace some risk. With Alcoa (AA) reporting its second quarter earnings after the closing bell, the company’s share price climbed 1.4 percent as speculators assumed that the company would win at “beat the number”. After the market close, Alcoa reported quarterly earnings of $76 million – or 7 cents per share – beating estimates of 6 cents per share. The company expects demand for aluminum to increase by 7 percent this year, despite the economic slowdown in China.

The Dow Jones Industrial Average (DIA) gained 88 points to finish Monday’s trading session at 15,224 for a 0.59 percent advance. The S&P 500 (SPY) climbed 0.53 percent to close at 1,640.

The Nasdaq 100 (QQQ) advanced 0.10 percent to finish at 2,966. The Russell 2000 (IWM) rose 0.38 percent to end the day at a new record-high closing level of 1,009.25.

In other major markets, oil (USO) declined 0.44 percent to close at $36.40.

On London’s ICE Futures Europe Exchange, August futures for Brent crude oil declined by 69 cents (0.64 percent) to $106.29/bbl. (BNO).

August Gold Futures advanced by $22.30 (1.84 percent) to $1,235.00 per ounce (GLD).

Transports rolled forward on Monday, with the Dow Jones Transportation Average (IYT) advancing 0.10 percent.

In Japan, stocks declined after the nation’s trade deficit expanded more than expected to 906.7 billion yen in May, compared with forecasts that the deficit would increase from 818.8 billion yen in April to 902.1 billion yen in May. The Nikkei 225 Stock Average sank 1.40 percent to 14,109 (NYSEARCA:EWJ).

In China, stocks took a hard fall as confidence in the nation’s economy faltered on the eve of the government’s release of inflation data. Economists expect to see that consumer prices increased by 2.5 percent in June, compared with May’s 2.1 percent increase. The Shanghai Composite Index sank 2.44 percent to close at 1,958 (FXI). Hong Kong’s Hang Seng Index fell 1.31 percent to finish the session at 20,582 (EWH).

European stocks had another big day on Monday as investors felt more optimistic about the economy (VGK). Friday’s dread among European investors, that America’s June non-farm payrolls report would motivate the Fed to begin the dreaded taper ASAP was relieved by a weekend of sober, yet upbeat economic commentary. Good news about the likelihood of a coalition government in Portugal helped lift investors’ spirits. Meanwhile, the Eurogroup finance ministers were meeting in Brussels to consider an €8.1 billion loan to Greece.

The Euro STOXX 50 Index finished Monday’s session with a 2.11 percent surge to 2,650 – bouncing back above its 200-day moving average of 2,635. Its Relative Strength Index is 50.47 (FEZ).

Technical indicators reveal that the S&P 500 continued rising above its 50-day moving average of 1,626 after closing at 1,640. Its Relative Strength Index increased from 54.48 to 56.85. Although the MACD remains slightly below the zero line, it has crossed above the signal line, suggesting a continued advance.

For Monday, all sectors were in positive territory except for the technology sector, which declined 0.06 percent. The utilities sector made the biggest gain, jumping 1.44 percent.

Consumer Discretionary (XLY): +0.93%

Technology: (XLK): -0.06%

Industrials (XLI): +0.27%

Materials: (XLB): +0.57%

Energy (XLE): +0.65%

Financials: (XLF): +0.73%

Utilities (XLU): +1.44%

Health Care: (XLV): +0.56%

Consumer Staples (XLP): +1.00%

Bottom line: Alcoa got the second quarter earnings reporting season off to a positive start, beating the earnings forecast of 6 cents per share by one penny.

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Disclaimer, Terms of Use, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.