The Dow Jones Industrial Average rallied for the fourth consecutive closing high on Friday … but it did so by rising less than 0.1%, and the S&P 500 actually slipped by a similar measure.
Helping the major indices, Citigroup Inc (NYSE:C) beat earnings and revenue expectations despite a drop of 17% in profits vs. last year and a shortfall in revs of 10%. But since the stock did better than expected, it opened 2.6% higher before general market weakness set in.
As a result, analysts were more bullish on the Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) results to be reported on Tuesday and Wednesday respectively. Bank of America Corp (NYSE:BAC) reports Q2 earnings Monday morning.
Crude oil rose 1.31% to $46.28, Gold gained 0.41% and the euro was unchanged at $1.1037, as was the pound at $1.31.88.
At the close, the Dow Jones rose 10 points to 18,517, the S&P 500 fell 2 points to 2,162, the Nasdaq fell 4 points to 5,030 and the Russell 2000 gained 3 points to close at 1,205. The New York Stock Exchange’s primary exchange traded 872 million shares, with total volume of 3 billion shares, and the Nasdaq crossed 1.6 billion shares. On the Big Board, advancers outpaced decliners by 1.2-to-1, and on the Nasdaq, advancers led by 1.1-to-1. Block trades on the NYSE were slightly up versus Thursday.
For the week: The DJIA rose 2%, the S&P 500 gained 1.5%, the Nasdaq rose 1.5% and the Russell 2000 jumped 2.5%.
Despite the lack of investor fear, as illustrated by the CBOE Volatility Index VIX, one respected manager says investor sentiment isn’t overly exuberant.
No wonder — just read the news. Morningstar reports that individual investors have pulled $52 billion from U.S. stock mutual and exchange-traded funds as of June 30.
Conclusion
Although there was much going on in financial and political happenings last week, it seems that the focus is again on interest rates and earnings. The conclusion by analysts is that a rate hike this year is off of the table. Thus, there has been a renewed interest in earnings. (And might I add, earnings expectations have been lowered to such a level that it would be almost impossible for most big companies to have a pronounced shortfall.)
With most moving averages arching up while block trades continue to favor up days, higher prices will probably continue. Institutional investors contribute to steady group rotation, where one sector lags and is snapped up on high volume. Note the recovery last week in the Dow transports.
And this week the financials may continue to be in vogue after last week’s rally anticipated relatively good results from some of the big banks.
As a friend from Morgan Stanley wrote to me, “Old leaders are becoming new laggards and old laggards have become the new leaders.”
The bull is on the field again.
Monday’s Trading Landscape
To see a list of the companies reporting earnings Monday, click here.
For a list of this week’s economic reports due out, click here.
