4.05pm: Wall Street closes with big gains across the board
US markets continued to show positive momentum on Friday, closing in the green all across the board.
At the close, the S&P 500 had gained 1.9% at 3,863 points, while the Dow finished 2.2% ahead at 31,288 and the Nasdaq rounded out the trio with a gain of 1.8% to end the day at 11,452 points.
12.05pm: Consumer sentiment improving, preliminary data shows
US stocks continued their rise at noon off the back of improved retail sales figures and higher-than-expected preliminary consumer sentiment readings for July.
At midday, the Dow Jones Industrial Average had gained 570 points at 31,200 points, the S&P 500 was up 62 points at 3,852 points and the Nasdaq Composite had added 150 points at 11,400 points.
IG chief market analyst Chris Beauchamp said Friday’s session had seen dip buyers come back into the fray, emboldened by better US retail sales figures.
“We are seeing yet another attempt at a ‘bear market rally,’ and a decent one is certainly overdue,” he said.
“Perversely, of course, strong retail spending would show that perhaps the economy isn’t cooling in the way the Fed would like, and even if inflation drops back a bit in the coming months, a full-on pause seems unlikely right now. Investors should be prepared for a fresh drop in September perhaps, with the summer rally likely to be only a brief dalliance.”
Meanwhile, the University of Michigan surveys of consumers showed consumer sentiment rose in July while inflation expectations dropped.
According to the survey, preliminary data for July showed consumer sentiment increased to 51.1, compared to a reading of 50 at the end of June. This exceeded the consensus analyst expectation of the index reading at 50.
Surveys of consumers director Joanne Hsu noted that consumer sentiment remained near all-time lows, with current assessments of personal finances continuing to deteriorate, reaching their lowest point since 2011.
However, Hsu noted that inflation expectations had improved somewhat.
“The median expected year-ahead inflation rate was 5.2%, little changed from the past five months,” Hsu said. “Median long run expectations fell to 2.8%, just below the 2.9% to 3.1% range seen in the preceding 11 months.”
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9.35am: Stocks rise at the open
US stocks opened higher as investors digested a slew of corporate earnings and new economic data released this morning.
Just after the open, the Dow Jones Industrial Average had added 406 points at 31,036 points, while the S&P 500 was up 50 points at 3,840 points and the Nasdaq Composite was up 149 points at 11,400 points.
Citigroup Inc (NYSE:C) was up about 6% at the open after the bank posted better-than-expected 2Q earnings, including a 10.6% revenue increase to $19.64 billion, ahead of the consensus market expectation of $18.22 billion.
On the other hand, Wells Fargo & Company (NYSE:WFC) had added about 3% after the financial services company reported weaker-than-expected 2Q earnings with profits down 48% from the year-ago quarter.
Forex.com financial market analyst Fiona Cincotta said, after a disappointing start to the earnings season yesterday with big banks reporting earnings misses and reduced profits, the market mood had been lifted by stronger than expected retail sales data.
“US retail sales rose by a larger than forecast 1%,” Cincotta said. “The data suggests that consumers are not reining in spending as inflation rises and consumer sentiment falls.”
“Looking ahead, US consumer confidence could paint a more depressing picture, with the Michigan consumer sentiment index expected to fall to 49.9, down from 50.00, a record low.”
6:30am: Rate expectations, earnings to hold sway
US stocks were expected to open slightly higher as investors continue to digest disappointing banking sector results and consider the prospect of a weakening economy.
Interest rate expectations for the upcoming US Fed meeting have been scaled back slightly after lurching in favor of a 100-basis point rate hike in the wake of a surge in the headline inflation for June, helping to shore up equity prices.
Futures for the Dow Jones Industrial Average were trading 0.3% higher pre-market, while those for the broader S&P 500 index were up 0.2% and futures for the tech-laden Nasdaq-100 rose 0.1%.
“Activity on Fed funds futures (has) scaled back the post-CPI hawkishness and presently priced in a 50-50 chance for a 75, or a 100 basis point hike this month,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank said, citing two Federal Open Market Committee members, who indicated that they support a smaller hike at the 26-27 July meeting rather than a 100 basis point hike as suggested by the market reaction to this week’s inflation data.
Headline inflation hit a 41-year high of 9.1% in June, above market forecasts of 8.8%. There is still some debate whether inflation in the current cycle has hit its peak, complicating the task for rate setters.
Up ahead today are results from Citigroup and Wells Fargo.
“Market attention (is) finally shifting to earnings from the economic data, and depending on what we see, it may be a good thing, or not,” said Ozkardeskaya.
She warned that earnings expectations may still be a little too optimistic.
“(T)his optimism carries the risk of disappointment because the latest quarter was heavily marked by the Ukrainian war, the spike in energy and commodity prices, the Chinese lockdown, that came along with supply chain issues,” she said, adding that “it’s possible that some of the S&P500 companies have felt the pinch of the global headwinds a bit heavier than what’s in the forecasts”.
In energy markets, benchmark crude oil prices remained under the $100 level, going some way to ease concerns over spiraling inflation. WTI crude oil futures were flat at $95.81 a barrel while Brent crude futures were up 0.4 % at $99.53.
Contact the author at jon.hopkins@proactiveinvestors.com