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Sunday Coffee with Eirik: Market Recap 7/10-7/16

U.S stocks got off to a slow start this week, but the Dow Jones Industrial Average and S&P 500 ended the week with a bang, closing at session highs and securing new records. Fed Chair Janet Yellen’s semiannual testimony before Congress sparked a rally on Wednesday that lingered all the way into Friday’s closing bell. In the end, the S&P 500 registered its largest weekly gain since the end of May. For the week, the S&P 500 advanced 1.4%.

The two first days of the week were rather uneventful. The stock market did make a sharp move lower on Tuesday after Donald Trump Jr. tweeted an email exchange that involved him setting up a meeting with a Russian lawyer in an attempt to gain some possibly incriminating information on then-presidential candidate Hillary Clinton. However, the bearish sentiment didn’t last and the S&P 500 entered Wednesday’s session flat for the week.

The stock market rallied in Wednesday’s session after Fed Chair Janet Yellen’s semiannual monetary policy testimony came off less hawkish than many were anticipating. One of the key takeaways from Ms. Yellen’s prepared remarks was her acknowledgment that “the federal funds rate would not have to rise all that much further to get to a neutral policy stance.” The statement created a sense that the Fed may in fact follow a shorter path of rate hikes that will keep the longer-run neutral level of the federal funds rate below levels that prevailed in previous decades.

On Thursday, the S&P 500 leaned on its most influential sectors, namely technology and financials and stocks continued to climb. The financial sector’s positive performance was particularly notable as the group plays an important role in driving economic activity and had failed to keep pace with the broader market in the three prior sessions.

Earnings season kicked off on a positive note, with JPMorgan Chase ($JPM), Citigroup $C) and Wells Fargo ($WFC) all posted better-than-expected profits. Shares of JPMorgan and Citigroup were under pressure, however, after reporting declines in trading sales.

“They all beat on the bottom line. There was a bit of disappointment on the guidance but overall it’s been a good start to the earnings season,” said Nick Raich, CEO of The Earnings Scout. He also noted that, of the 30 S&P 500 companies that have reported, 80 percent have beat on the bottom line

Overall, analysts anticipate another quarter of above-average strength. CFRA Research said it anticipates 6.2% year-over-year earnings growth among S&P 500 companies, better than a 1.7% earnings decline seen in the same quarter a year earlier. The energy sector is expected to lead the pack, recovering from weakness over the previous two years.

Sprint Corp. ($S) increased 4% on reports the company is courting an investment. Billionaire investor Warren Buffett and media mogul John Malone reportedly met with Sprint Chairman Masayoshi Son to discuss an investment in the telecom, according to The Wall Street Journal.

Tech stocks were rising alongside broader markets. Netflix Inc. ($NFLX) , Alphabet Inc. ($GOOGL) , Microsoft Corp. ($MSFT) , Facebook Inc. ($FB)  and Alibaba Group Holding Ltd ($BABA) were each higher.

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