Stock Market News For Jul 15, 2019

Wall Street closed sharply higher on Friday following dovish signals from the Fed chair Jerome Powell, hinting at a rate cut in July. Meanwhile, investors are cautiously waiting for second-quarter 2019 earnings, which will kick off from this week. All three major stock indexes closed in the green. For the week as a whole, these indexes recorded fresh all-time highs.

The Dow Jones Industrial Average (DJI) surged 0.9% or 244.02 points to close at 27.332.10. The S&P 500 climbed 0.5% to close at 3,013.75. Meanwhile, the Nasdaq Composite Index closed at 8,244.14, soaring 0.6%. The fear-gauge CBOE Volatility Index (VIX) decreased 4.2% to close at 12.39. A total of 5.68 billion shares were traded on Friday, lower than the last 20-session average of 6.71 billion. Advancers outnumbered decliners on the NYSE by a 2.02-to-1 ratio. On Nasdaq, a 1.43-to-1 ratio favored advancing issues.

How Did The Benchmarks Perform?

The Dow closed in positive territory for the third successive day with 26 components of the 30-stock blue-chip index closing in the green while four finished in the red. The S&P 500 also closed in positive territory for consecutive days. The Industrials Select Sector SPDR (XLI) gained 1.8% while the Health CareSelect Sector SPDR (XLV) lost 1.1%. Notably, eight out of 11 sectors of the benchmark index closed in the green while three ended in the red. The Nasdaq Composite ended in the green for the second straight-day due to strong performance by large-cap stocks.

Fed Signals an Impending Rate Cut

On Jul 10, in a testimony to the House Financial Services Committee, Powell said that the United States is suffering from a bout of uncertainty caused by trade tensions and weak global growth. He added “Crosscurrents have reemerged. Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened.”

Powell reiterated Fed’s commitment to act as appropriate to sustain U.S. economic expansion, providing a clear message for a rate cut possibly after the upcoming FOMC meeting scheduled on Jul 30 - 31. At present, 100% respondents of CME FedWatch are expecting a 25 basis-point reduction in July.

Bleak Expectations From Second-Quarter Earnings

At present, the market is anticipating a relatively disappointing earnings session for the second quarter of 2019. As of Jul 12, total Q2 earnings for the S&P 500 Index are expected to be down 3.4% from the year-earlier period on 3.9% higher revenues. This would follow the 0.2% earnings decline on 4.5% higher revenues in Q1.

If the current consensus estimate for the second-quarter proves itself true, then it will be two consecutive quarters of earnings decline for the S&P 500. Technology, Aerospace, Basic Materials, Construction and Conglomerates sectors are likely to witness double-digit decline in second-quarter earnings. (Read More: What to Expect from Bank Earnings?)

Major banks such as, JPMorgan Chase & Co. (NYSE:JPM) , The Goldman Sachs Group, Inc. (NYSE:GS) , Citigroup Inc. (NYSE:C) , Morgan Stanley (NYSE:MS) and Bank of America Corp. (NYSE:C) will reports earnings results this week. JPMorgan Chase and The Goldman Sachs carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Department of Commerce reported that producer price index for the month of June rose 0.1% compared with the consensus estimate, which predicted the indicator would remain flat. However, over a 12-month period, the producer price index rose 2.1% compared with 2.3% in May.

Weekly Roundup

The last week was an impressive one for Wall Street. All three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- surged 1.5%, 0.8% and 1%, respectively. Moreover, all three indexes recorded fresh all-time highs last Friday. Notably, the S&P 500 closed above the 3,000 mark for the first time in its history.

Strong indications from the Fed chair Jerome Powell that a rate cut was likely in July significantly raised investors’ confidence in risky assets like equities. Market participants broadly believe that a reduction in rates will act as cushion for U.S. stocks in case of a decline in second-quarter earnings.

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