U.S. equities began today on a positive note, as last week’s upbeat U.S. labor report along with the start of corporate earnings season fueled increased optimism about growth in the world’s largest economy. It helped ease concerns about rising interest rates and the increased likelihood that the Fed will begin tapering its asset purchases. Stocks registered the bulk of their gains in the opening minutes and pushed the S&P 500 closer to its all-time high set in May.
The upbeat open was aided by a strong showing in Europe where major averages overlooked disappointing German industrial production data and rallied on indications the next tranche of Greek aid will be approved by Eurozone officials. However, stocks in Asia finished broadly lower. Concerns about Chinese economic growth ahead of this week’s release of a plethora of key reports for June may have kept sentiment in check, as well as some caution before the start of earnings season in the U.S.
Today’s economic calendar was light. Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $19.62 billion during May, the fastest pace in a year and more than the $12.50 billion forecast of economists, while April’s figure was adjusted downward to an increase of $10.87 billion from the originally reported $11.06 billion. Treasuries finished higher with interest rates pulling back from their recent rally, while showing little reaction to the consumer credit report. How about stocks?
While most sectors were able to hold their opening gains, technology and telecom services underperformed from the start. While the telecom space lagged, other countercyclical sectors settled in mixed fashion. Health care ended just ahead of the broader market; consumer staples displayed relative strength; and utilities sector finished atop the leader board.
With regards to cyclical groups, only technology and industrials trailed behind the S&P. The industrial sector was pressured by transportation-related names. Elsewhere, the relative strength of retailers provided support to the discretionary sector, and overshadowed the broad losses among homebuilders.
Earnings season is here, and analysts expect S&P 500 companies’ earnings to rise 2.9 percent in the second quarter from a year ago, though that is down from the 5.4 percent growth seen in the first quarter, according to Thomson Reuters data. Quarterly revenue is forecast to increase 1.5 percent from a year ago.
Our Trend Tracking Indexes (TTIs) headed higher with the Domestic TTI reaching the +1.65% level, while the International TTI settled at +4.04%.
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