Benchmarks finished at record highs on Friday as tech stocks gained. Tech has come a long way, evolving from the dot-com catastrophe to becoming a safety trade and are now favored by active managers. Investors are pouring money into Internet and tech companies, which are less vulnerable to tax cuts and changes in interest rates and are expected to benefit from lower corporate taxes, mainly on cash held overseas.
Earnings season, meanwhile, kicked off. JP Morgan, Citigroup and Wells Fargo all posted better-than-expected earnings results, but, their shares fell after reporting decline in trading sales. Investors also digested a couple of poor economic data on retail sales and inflation, which made market participants believe that the Federal Reserve may turn dovish.
The Dow closed at a record high for the third time in a row, while the 30-stock index registered its 25th record close for this year. The Dow advanced 0.4% to close at 21,637.74. The S&P 500 also notched a record high, its first since June 19. The benchmark index rose 0.5% to finish at 2,459.27. The Nasdaq, however, finished slightly below its closing record of 6,321.76 set on June 8. The tech-heavy index gained 0.6% to close at 6,312.47.
For the week, all the major indexes posted solid gains. The Dow, the S&P 500 and the Nasdaq increased 1%, 1.4% and 2.6%, respectively. The indexes have overcome series of bottlenecks from tech overvaluation fears to Russia’s involvement in the U.S. election to climb back into record territory.
Big Bank Earnings In a Nutshell
Banking-behemoths JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) handily beat earnings and revenue estimates, while Wells Fargo (WFC - Free Report) beat earnings expectations but modestly missed revenue estimates. A big reason for the market’s lukewarm reaction to the seemingly positive bank earnings is the soft guidance for the current period, particularly from JPMorgan. Also, signs of a slowdown in trading weighed on bank stocks (read more: Bank Earnings Are Good, But Fail to Impress).
Soft economic data on retail sales and particularly the Consumer Price Index, furthermore, reduced the chances of additional rate hikes this year. This has dragged down Treasury yields, which has lowered the chances of increase in profits from one of the major profit centers for banks – interest income.
Retail Sales Fizzle Out, Inflation was Flat
Sales at retailers fell 0.2% in June, marking the second straight drop and the biggest decline of the year. Most of the retail segments including gas stations, grocers, restaurants, book stores, sporting-goods stores and department stores saw a decline in sales figures. Such disappointing numbers indicated that the U.S. economy hasn’t rebounded strongly in the spring, which may give the Fed a reason to reassess how quickly it withdraws stimulus from the economy.
The consumer-price-index, meanwhile, was unchanged last month. The index showed that the prices Americans pay for goods and services aren’t rising very much. In fact, the rate of inflation over the past 12 months has slowed down to 1.6% in June from 1.9% in the prior month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks that made Headlines
Tiffany Aims to Rev Up Sales, Hires Former Diesel Executive
Tiffany & Co. (TIF - Free Report) , which holds a significant position in the global jewelry market, took a bold step in a bid to ramp up sales by appointing former Diesel as well as Bulgari’s chief executive Alessandro Bogliolo as the CEO of the company. (Read More)
Molson Coors Inks Licensing Agreement with Hornell Brewing
Molson Coors Brewing Company (TAP - Free Report) recently signed a partnership agreement with Hornell Brewing Co., Inc., which is an affiliate of AriZona Beverages. (Read More)
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