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Stock Market News for Jul 1, 2019

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Wall Street closed higher on Friday buoyed by strong performance of bank stocks after the Fed released results for the second round of stress test. Investors also cautiously awaited for the outcome of the meeting between U.S. President Donald trump and Chinese leader Xi Jinping scheduled to take place at the G-20 summit in Japan. All three major stock indexes finished in the green.

However, for the week as a whole, all three indexes closed in the red. In contrast, for the month of June, the indexes hit record highs. The Dow and S&P 500 posted their best June in 81 and 64 years, respectively. The Nasdaq Composite recorded its best June in nearly two decades. In the second quarter and first half of 2019, the indexes also performed impressively. Notably, the S&P 500 registered its strongest gains for the first half in 22 years.

The Dow Jones Industrial Average (DJI) gained 0.3% to close at 26,599.96. The S&P 500 climbed 0.6% to close at 2,941.76. Meanwhile, the Nasdaq Composite Index closed at 8,006.24, rising 0.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 4.7% to close at 15.08. A total of 10.26 billion shares were traded on Friday, higher than the last 20-session average of 7.11 billion. Advancers outnumbered decliners on the NYSE by a 2.84-to-1 ratio. On Nasdaq, a 2.66-to-1 ratio favored advancing issues.

How Did The Benchmarks Perform?

The Dow closed in positive territory with 17 components of the 30-stock blue-chip index closing in the green while thirteen finished in the red. The tech-heavy Nasdaq Composite ended in the green due to strong performance by large-cap stocks. The S&P 500 also closed in positive territory. The Financials Select Sector SPDR (XLF) and Energy Select Sector SPDR (XLE) surged 1.6% and 1.2%, respectively. Notably, nine out of total 11 sectors of the benchmark index closed in the green while two ended in the red.

Bank Stocks Surge

After the market close on Jun 27, the Federal Reserve declared results of the second round of stress test of 18 major banks operating in the United States. Barring the one, all seventeen banks successfully cleared the requirements of the Fed. With this, these banks got the central bank’s approval to raise dividend and enlarge their share repurchase programs.

Consequently, shares of JPMorgan Chase & Co. (JPM - Free Report) , The Goldman Sachs Group Inc. (GS - Free Report) and Citigroup Inc. (C - Free Report) climbed 2.7%, 2.7% and 2.8%, respectively. All three stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Trump – Xi Meeting in Focus

President Donald Trump and his Chinese counterpart Xi Jinping are scheduled to meet to discuss trade during the G-20 meeting at Osaka, Japan. Notably, U.S.-China trade negotiations broke down abruptly on May 5 when market participants were thinking that a near-term deal was possible.

The United States blamed China for backtracking on its previous commitments. So far, the United States has imposed 25% tariffs on $250 billion Chinese goods. China has retaliated by levying 25% tariff on $160 billion U.S. exports. Additionally, President Trump had threatened imposing 25% tariffs on another $300 billion of Chinese goods if stalemate prevails in trade negotiations for an indefinite time period.

Economic Data

The Department of Commerce reported that personal consumption expenditure (PCE) price index increased 0.2% in May, unchanged from April’s pace. Year over year, PCE inflation declined to 1.5% in May from 1.6% in April. Core PCE inflation (excluding food and energy items) grew 0.2% in May, in line with April and the consensus estimate. Year over year, core PCE inflation rose 1.6%, flat with April.

Personal income grew 0.5% in May, flat with April but surpassed the consensus estimate of 0.3%. Personal disposable income also grew 0.5% in May, in line with April. Personal spending increased 0.4% in May compared with the revised estimate of an increase of 0.6% in April. The consensus estimate was 0.5%. Personal saving rate in May was 6.1%, in line with April.

Weekly Roundup

Last week was a disappointing one for U.S. stock markets. The Dow declined 0.5% while both the S&P 500 and Nasdaq Composite dropped 0.3%. Wall Street plummeted as uncertainty rose over possible rate cut by the Fed in July and the outcome from the upcoming meeting between Presidents Trump and Xi.

Monthly Roundup

Wall Street witnessed an impressive turnaround in June after major indexes plunged in May following an abrupt broke down of the U.S-China trade negotiations. The Dow, S&P and Nasdaq Composite jumped 7.2%, 6.9% and 7.4%, respectively. This was the Dow’s best June since 1938. The S&P 500 witnessed best June since 1955 and Nasdaq Composite recorded the same since 2000.

The Fedwas largely responsible for the June rally. The Fed Chair and other senior members of the central bank have hinted that they could adopt a softer approach to policy. Market participants feel that it is highly likely that one or more rate cuts will take place this year. In fact, several market watchers are expecting a quarter to half a percentage point cut in benchmark rate throughout the rest of 2019.

Quarterly Roundup

After a successful first quarter, Wall Street continued to rally in the second quarter too. The Dow, S&P 500 and Nasdaq composite gained 2.8%, 3.4% and 4.2%, respectively. Stock gains continued in April after witnessing volatility in the second half of March when a bond yield inversion occurred for the first time since 2007.

However, U.S. stocks plunged in May after President Trump halted trade talks with China, alleging that the latter had backtracked from promises given earlier. Finally the market rebounded in June on rate cut hopes from the Fed. 

Half Yearly Roundup

Wall Street has completed a record-breaking first half of 2019. Three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- are up 14%, 17.4% and 20.7%, respectively. The S&P 500 posted its best first-half performance since 1997.

Positive developments on the trade war front, a dovish monetary stance adopted by the Fed and rebound of crude oil prices primarily owing to supply cut by OPEC and Russia are major reasons for Wall Street’s rally.

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