Market Insights 7/15/2019

U.S. equities finished higher, but very near the unchanged mark, with investors cautious ahead of an acceleration of Q2 earnings season with banks in focus.

Treasury yields were lower and the U.S. dollar ticked higher following a read on upbeat read on regional manufacturing activity, while crude oil prices declined and gold lost ground.

The Markets…

The Dow Jones Industrial Average rose 27 points (0.1%) to 27,359

The S&P 500 Index was unchanged at 3,014

The Nasdaq Composite added 14 points (0.2%) to 8,258

In light volume, 676 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil fell $0.63 to $59.58 per barrel and wholesale gasoline was down $0.05 at $1.93 per gallon

The Bloomberg gold spot price decreased $1.73 to $1,414.02 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% higher to 96.94

Citigroup Inc. reported Q2 earnings-per-share of $1.95, or $1.83 ex-items, versus the $1.81 Wall Street estimate, with revenues rising 2.0% year-over-year to $18.8 billion, above the expected $18.5 billion. The company noted higher global consumer banking revenues and although its fixed income markets and investment banking revenues declined, they were above expectations.

Regional manufacturing activity returns to expansion to kick off the economic week

The Empire Manufacturing Index showed output from the New York region improved more than expected and returned to expansion territory (a reading above zero) for July. The index rose to 4.3 from June’s unrevised -8.6 level, with the Bloomberg forecast calling for a rise to 2.0.

Treasuries were slightly higher, as the yield on the 2-year note dipped 1 basis point (bp) to 1.82%, the yield on the 10-year note fell 2 bps to 2.09%, and the 30-year bond rate lost 3 bps to 2.60%.

As noted if the trade stalemate lingers and/or the next round of tariffs on Chinese imports kicks in, the damage to the economy is likely to escalate. The burning question remains about the sufficiency of monetary policy ammunition as an offset to weak growth. The month-long inversion of the yield curve has been adding to that angst. Absent a comprehensive trade deal, it’s difficult to imagine that executives will be confident enough to expand capital spending, which had been one of the primary rationales for 2018’s corporate tax cut.

Europe mostly higher, Asia mixed as data eyed

European equities finished mostly higher, with the global markets digesting a 27-year low in China’s Q2 GDP growth, but June reads on Chinese industrial production and retail sales both grew more than expected. The ramp up in Q2 earnings season also garnered attention with Citigroup mostly topping quarterly estimates in the U.S., while shares of Galapagos NV rallied on the additional stake in the Belgian biotechnology company from Gilead Sciences. The euro and British pound dipped versus the U.S. dollar, while bond yields in the region trimmed a recent run.

Stocks in Asia diverged, with markets in Japan closed for a holiday and the markets digesting a flood of economic data out of China that painted a mixed picture and awaited the ramp-up of earnings season in the U.S. China’s Q2 GDP growth came in at a 27-year low of 6.2% y/y, matching expectations and compared to the 6.4% pace posted in Q1. Moreover, June reads on China’s industrial production and retail sales both rose at larger amounts than anticipated. Stocks in both mainland China and Hong Kong gained slight ground.