Investors react positively to bank earnings
US stocks ended with moderate losses on Tuesday, 16 July 2019. The three major U.S. stock benchmarks snapped a multi-session win streak on Tuesday as President Donald Trump said an agreement with China on trade tariffs had "a long way to go," and a trio of the U.S.'s largest banks reported quarterly results.
The Dow Jones Industrial Average closed down by about 24 points, or less than 0.1%, at 27,336, ending four straight days of gains. The S&P 500 closed off 0.3% at 3,004, halting a 5-day win streak and the Nasdaq Composite Index finished down 0.4% at 8,222, ending its string of gains at two. All three benchmarks closed at records on Monday.
The session began with very little price action, although the Dow did set a new all-time high in the early going amid positive reactions to earnings reports from JPMorgan Chase and Goldman Sachs. Wells Fargo and Johnson & Johnson beat earnings estimates, but shares finished noticeably lower.
Despite the mostly positive results, the broader market was seemingly uninterested as the good news may have already been priced in. An understanding that earnings from big tech companies are just around the corner may have also kept some buyers sidelined.
Among economic data on Tuesday, U.S. retail sales data revealed a 0.4% rise in June, but the cost of imported goods in June fell by 0.9%, the steepest amount in six months, while industrial production last month was flat.
Total retail sales were up 0.4% over the month in June (consensus +0.2%) following a downwardly revised 0.4% increase (from +0.5%) in May. Retail sales, excluding autos, were also up 0.4% (consensus +0.2%) following a downwardly revised 0.4% increase (from +0.5%) in May. Core retail sales, which exclude motor vehicle, gasoline station, building materials, and food services and drinking places sales, jumped 0.7% over the month. The key takeaway from the report is that it was a solid report overall and will diminish the prospect of a 50-basis points cut at the July 30-31 FOMC meeting.
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Import prices declined 0.9% over the month following an upwardly revised unchanged reading (from -0.3%) for May. Excluding fuel, import prices were down 0.3% for the second straight month. Export prices declined 0.7% over the month and were down 1.1% excluding agricultural exports.
Industrial production was unchanged in June (consensus +0.2%) after increasing an unrevised 0.4% in May. The total industry capacity utilization rate fell to 77.9% (consensus 78.2%) from an unrevised 78.1% in May. The key takeaway from the report is that factory production declined at an annual rate of 2.2% in the second quarter, which was roughly the same pace as in the first quarter.
Business inventories increased 0.3% in May (consensus 0.4%) following an unrevised 0.5% increase in April. Business sales increased 0.2% after declining an unrevised 0.2% in April.
Separately, the NAHB Housing Market Index for July came in at 65 (consensus 62), up from 64 from June.
Bullion prices ended mixed at Comex on Tuesday, 16 July 2019. Gold ended lower on Tuesday as a rise in U.S. retail sales contributed to a stronger U.S. dollar, pressuring prices for the precious metal. The upbeat retail sales number, however, also lifted prices for silver, brightening the metal's industrial demand prospects. Silver gained.
August gold trading on Comex fell $2.30, or 0.2%, to settle at $1,411.20 an ounce. September silver meanwhile, picked up 31.1 cents, or 2%, to $15.678 an ounce, the highest finish for a most-active contract since late February.
The move for gold, however, comes as the dollar strengthened, advancing 0.5%, as gauged by the ICE U.S. Dollar Index. A stronger dollar tens to be a negative for commodities priced in the unit, making them relatively more expensive to users of other currencies.
Crude oil prices fell more than 3% on Tuesday, 16 July 2019 afternoon as officials in the U.S. and Iran made initial overtures toward new negotiations. Iran's foreign minister told NBC that the country would be open to negotiations if the U.S. gave it relief from sanctions.
August West Texas Intermediate crude dropped $1.96, or 3.3%, to settle at $57.62 a barrel, for the lowest finish on the New York Mercantile Exchange since July 5. The downturn followed an earlier Tuesday high of $60.06 and a decline of 1.1% on Monday. International benchmark September Brent lost $2.13, or .2%, to end at $64.35 a barrel on ICE Futures Europe.
U.S. oil inventories data are due out from the Energy Information Administration on Wednesday. Market expects the government report to reveal a fall of 4.2 million barrels in crude supplies, on average, for the week ended July 12. Gasoline stockpiles are expected to fall by 1.5 million barrels, while distillate supplies are seen higher by 300,000 barrels.
Looking ahead, investors will receive Housing Starts and Building Permits for June, the weekly MBA Mortgage Applications Index, and the Fed's Beige Book for July on Wednesday.
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