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Stocks Nearly Flat, Flood Of Earnings On Tap

Published 07/19/2017, 12:24 AM
Updated 07/09/2023, 06:31 AM

U.S. equities finished the first trading session of the week nearly where they started, as investors appeared to be in wait-and-see mode ahead of an acceleration in Q2 earnings season. Treasury yields dipped, along with crude oil prices, while the US dollar was flat and gold ticked higher. News on the economic front was limited, with manufacturing in the New York region remaining in expansion territory, while data out of China was upbeat.

The Dow Jones Industrial Average (DJIA) ticked 6 points lower to 21,632, the S&P 500 Index was nearly unchanged at 2,459, and the NASDAQ Composite increased 2 points to 6,314. In light to moderate volume, 674 million shares were traded on the NYSE and 1.5 billion shares changed hands on the NASDAQ. WTI crude oil lost $0.52 to $46.02 per barrel and wholesale gasoline was unchanged at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.14 to $1,233.84 per ounce, and the dollar index, a comparison of the U.S. dollar to six major world currencies, was flat at 95.11.

BlackRock Inc. (NYSE:BLK $425) reported Q2 earnings-per-share (EPS) of $5.22, or $5.24 ex-items, versus the $5.40 FactSet estimate, as revenues rose 6.0% year-over-year (y/y) to $3.0 billion, roughly in line with expectations. The investment management company said while significant cash remains on the sidelines, investors have begun to put more of their assets to work. Shares traded lower.

JB Hunt Transport Services Inc (NASDAQ:JBHT $94) posted Q2 EPS of $0.88, below the Street's $0.91 estimate, with revenues increasing 7.0% year-over-year (y/y) to $1.7 billion. The company said benefits of volume growth and increases in revenue producing truck counts were substantially offset by lower customer rates and higher costs, including rail and over the road transportation costs and higher driver wages and recruiting costs. Shares overcame early pressure and were higher.

Shares of FedEx Corp. (NYSE:FDX $215) came under pressure after the company disclosed in a regulatory filing that the impact of the June cyberattack at its TNT unit is still being evaluated but is likely material, citing loss of revenue due to decreased volumes and remediation/contingency costs.

The stock markets are at record highs and Q2 earnings season is set to ramp up, projected to show a growth rate of 6.8%, with nine sectors reporting expansion, led by a sharp rebound in the energy sector, per data compiled by FactSet.

Regional manufacturing activity remains in expansion territory, kicking off economic docket

The Empire Manufacturing Index showed output from the New York region slipped but remain in expansion territory (a reading above zero) for July. The index declined to 9.8 from June's unrevised 19.8 level, with the Bloomberg forecast calling for a reading of 15.0.

Today's report kicks off the economic week, which will likely share the spotlight with earnings season but bring updates on areas of the economy that have been bright spots. Housing will dominate the docket, beginning with tomorrow's release of the July NAHB Housing Market Index, with economist expecting the read of homebuilders' view of the housing market to remain at June's level of 67, with housing starts and building permits coming later in the week. Moreover, we are getting the first look at manufacturing activity for July, as the Empire Manufacturing Index will be followed by the Philly Fed Manufacturing Index. The week will culminate with the Index of Leading Economic Indicators, which is projected to continue to indicate further economic expansion. Tomorrow's docket will also include the Import Price Index.

Treasuries finished higher, as the yields on the 2-Year and 10-Year notes, as well as the 30-Year bond, all declined 2 basis points (bps) to 1.35%, 2.31% and 2.90%, respectively.

Bond yields and the U.S. dollar slipped last week after rebounding recently, pressured by softer-than-expected inflation and retail sales reports, along with Fed Chair Janet Yellen's dovish semi-annual monetary policy testimony. In the second half of 2017, we expect 10-year Treasury yields to remain in a 2% to 2.5% range, consistent with the eight-year "lower for longer" theme in the bond market.

The political front remains in focus as the markets look to the highly scrutinized revised Senate healthcare bill, which faces a vote as the Republicans hold a slim majority. The vote has been delayed again due to Senator McCain's eye surgery.

Europe and Asia mixed following China data and ahead of ECB decision

European equities finished mixed, with oil and gas and basic materials stocks gaining ground following a plethora of upbeat Chinese economic data, headlined by better-than-expected Q2 GDP growth. Financials dipped amid a decline in most global bond yields and technology stocks saw some pressure, while conviction may have been held in check by this week's upcoming monetary policy decision from the European Central Bank and as earnings season is set to ramp up. Also, the markets eyed the second round of U.K. Brexit negotiations.

In economic news, eurozone consumer price inflation came in flat month-over-month in June, matching expectations. The euro was little changed and the British pound was lower versus the U.S. dollar.

Stocks in Asia finished mixed, despite some favorable Chinese economic data, though volume was lighter than usual as Japanese markets were closed for a holiday. Mainland Chinese shares fell sharply, despite the Asian nation posting y/y Q2 GDP growth of 6.9%, versus the projected 6.8% expansion, matching Q1's pace, while it also reported stronger-than-expected retail sales, fixed asset investment and industrial production for June. Sentiment appeared to be hampered by a flare-up in regulatory crackdown concerns in the wake of the country's National Financial Work Conference over the weekend. Stocks in Hong Kong, however, advanced.

Tomorrow's international economic calendar will offer the minutes from the Reserve Bank of Australia's latest monetary policy meeting, CPI, PPI and the Retail Price Index from the U.K., as well as the Zew Economic Sentiment Survey from Germany.

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