- More than 140 S&P 500 companies and a third of Dow components due to report earnings this week
- Investors are looking for Federal Reserve to deliver at least a quarter-point rate cut at end of the month
- Haliburton kicked off busy earnings week with better-than-expected results
U.S. stock-market indexes closed higher Monday, as investors adjusted expectations around a widely anticipated rate cut by the Federal Reserve at the end of the month and began wading through a sea of corporate results after a strong start to earnings season.
How did the major benchmarks fare?
The Dow Jones Industrial Average DJIA, +0.07% rose 17.7 points, or 0.1%, at 27,171.9, while the S&P 500 index SPX, +0.28% advanced 8.42 points, or 0.3%, to 2,985.03, supported largely by gains in the information-technology sector (up 1.2%). The Nasdaq Composite Index COMP, +0.71% gained 57.65 points, or 0.7%, to trade at 8,204.14.
What drove the market?
After a strong start to earnings season last week, investors began parsing the first of many major U.S. corporate earnings reports Monday, with 144 S&P 500 companies and a third of Dow components set to report this week.
“Investor optimism has been supported by a better-than-expected start to the Q2 EPS reporting season, as well as the ongoing possibility of a rate cut by the end of the month,” said Sam Stovall, chief investment strategist at CFRA, in a Monday note.
Stocks were bruised late last week as investors scaled back expectations for a half-point rate cut after the New York Federal Reserve emphasized that dovishly interpreted remarks by its president, John Williams, weren’t about potential policy actions at the next Fed meeting. Also, The Wall Street Journal on Friday, citing public remarks and interviews, reported Fed officials were signaling a quarter-point cut when policy makers meet July 30-31.
Shares of energy services firm Haliburton Co. HAL, +9.15% ended the day 9.2% higher, after the company reported second-quarter profit that topped expectations. Heavyweights due to report in the week ahead include Facebook Inc. FB, +2.00% , Coca-Cola Co. KO, -0.33% , Caterpillar Inc. CAT, -0.73% and McDonald’s Corp. MCD, +0.53%
“So far in 2Q19 reporting season, 79% of the S&P 500 results that have come in have beaten consensus EPS expectations (down from 83% in our last update) while 63% have beaten consensus on sales (down from 75% in our last update),” wrote Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. “Despite the slippage, EPS beats are still near the high end of their historical range, and both EPS and sales beats are still tracking well above the 1Q19 reporting season.”
Analysts said investors will also be focusing on results and management commentary for concerns over the global economic outlook and the impact of the U.S.-China trade war on performance and outlook.
U.S.-China trade negotiations were in focus, after reports that the two sides would soon meet face-to-face, with the South China Morning Post saying that U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin would travel to Beijing next week.
Also supporting equity markets were reports that the Congress and the White House had reached a deal to increase spending levels and suspend the federal debt limit for two years.
Oil futures CLQ19, +0.83% BRNU19, -0.66% were up strongly Monday as tensions between Iran and Western nations rose following Tehran’s announcement on Friday that it had seized a British-flagged oil tanker. Crude oil rose 0.8%.
The Chicago National Activity index rose to negative-0.02 in June, up from negative-0.05 in May, the Federal Reserve Bank of Chicago said Monday.
Which stocks were in focus?
Equifax Inc. EFX, +0.39% came to a $700 million settlement with federal regulators and U.S. states related to a 2017 data breach that exposed the personal data of nearly 150 million Americans. Shares rose 0.4% Monday.
Shares of DaVita Inc. DVA, +4.91% rallied 4.9% Monday, after the dialysis-services company raised its profit outlook for the second quarter, ahead of an expected execution of a $1.2 billion share repurchase program.
Apple Inc. AAPL, +2.29% shares rose 2.3% Monday, making it the best-performing Dow component on the day, after Morgan Stanley analyst Katy Huberty raised her price target on the stock to $247 from $231 ahead of the company’s Tuesday afternoon earnings report.
How did other markets trade?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.29% fell less than a basis point to 2.043%.
Stock markets in Asia closed mostly lower Monday, with China’s Shanghai Composite SHCOMP, +0.45% falling 1.3%, Japan’s Nikkei 225 NIK, +0.95% losing 0.2% and Hong Kong’s Hang Seng HSI, +0.34% retreating 1.4%. European stocks edged higher, with the Stoxx Europe 600 HSI, +0.34% ending the day up 0.1%.
The price of gold GCQ19, -0.31% fell 0.1%, while the U.S. dollar DXY, +0.23% rose 0.1% relative to its major trading partners.