Benchmarks closed higher on Tuesday despite investors pulling out of big tech stocks. Investors kept a close watch on big bank earnings for the second-quarter, rising coronavirus cases and deteriorating U.S.-China relations.
The Dow Jones Industrial Average (DJI) rose 556.79 points, or 2.1%, to close at 26,642.59 and the S&P 500 rose 42.30 points, or 1.3% to close at of 3,197.52. The Nasdaq Composite Index closed at 10,488.58, adding 97.73 points, or 0.9%. The fear-gauge CBOE Volatility Index (VIX) decreased 8.3%, to close at 29.52. Advancing issues outnumbered declining ones for 1.55-to-1 ratio on the NYSE and a 1.23-to-1 ratio on the Nasdaq favored advancers
How Did the Benchmarks Perform?
On Tuesday, the Dow was boosted by 4.8% jump in shares of Caterpillar Inc. CAT. While the S&P 500’s rally was led by energy, materials and industrials sectors, each jumped at least 2%. All the 11 sectors of the broader index closed in the positive territory.
However, investors continued to pull out frombig tech stocks that have stayed resilient during the coronavirus pandemic, limiting gains in the Nasdaq and the S&P 500. Shares of Amazon.com, Inc. AMZN and Netflix, Inc. NFLX declined 0.6% and 0.1% respectively on Tuesday.
Overall, the S&P 500 posted five new 52-week highs and no new lows, while the Nasdaq Composite recorded 26 new highs and 28 new lows.
New Coronavirus Cases Remain a Concern
On Tuesday, the United States registered 65,594 new cases and 935 new deaths. Texas, California and Florida added more than 9,000 new cases on Jul 14 though governors of the states have initiated new business restrictions, rolling back reopening plans. Spike in coronavirus cases created obstruction in reopening plans. Previously on Jul 13, California Gov. Gavin Newsom had ordered a rollback of indoor operations of restaurants, bars, zoos, wineries, museums, and movie theaters as rise in new cases create fresh worries that the COVID-19 pandemic recovery may take longer than expected
Big Banks Report Q2 Earnings
The second-quarter 2020 earnings season kicked off on Tuesday with big banks in the United States reporting earnings for the quarter ending in June. While some surpassed estimates, others faced the brunt of the coronavirus pandemic.
JPMorgan Chase & Co. JPM reported earnings beat for the second-quarter 2020. A significant improvement in trading and mortgage banking businesses drove the banking giant. The banker reported earnings of $1.38 per share surpassing the Zacks Consensus Estimate of $1.34. However, near-zero interest rates and dismal loan demand have hurt interest income and operating expenses increased year over year in the reported quarter. (Read More)
Shares of JPMorgan Chase that holds carry a Zacks Rank #3 (Hold) rose 0.6% on Tuesday. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Citigroup Inc. C reported second-quarter 2020 earnings of $0.50 per share, beating the Zacks Consensus Estimate of $0.47 per share. The company’s revenue for the quarter came in at $19.77 billion surpassing the Zacks Consensus Estimate by 3.06%. The banker recorded higher revenues on investment banking and market revenues. However, equity market revenues disappointed and prime finance and securities services revenues declined. Shares of Citigroup plunged 3.9% on Tuesday despite the better-than-expected results. (Read More)
However, Wells Fargo & Company WFC could not outshine in this quarter and reported a wider loss of 66 cents per share, which exceeds the Zacks Consensus Estimate loss of 7 cents. The coronavirus pandemic led crisis has attributed to a reserve build of $8.4 billion, weighing heavily on the bank’s earnings. Additionally, reduced net interest income on lower rates and a disappointing fee income, negatively impacted the company’s results. Shares of Wells Fargo declined 4.6% on Jul 14. (Read More)
Separately, facing the brunt of the coronavirus pandemic, shares of Delta Air Lines, Inc. DAL slid 2.7% on Tuesday after the company posted a loss of $4.43 per share in the second-quarter 2020, wider than the Zacks Consensus Estimate of a loss of $3.97. Losses in passenger revenue were even greater in this quarter, down 18.2% in the first quarter of 2020. The company reported that passenger revenues slumped 94% year over year in the June quarter to $678 million with enplaned passengers plummeting 93% due to low demand for air travel. (Read More)
US-China Relations Deteriorate Again
The deteriorating U.S.-China relations impacted technology stocks. On Tuesday, the Trump administration rejected China’s claims in the South China Sea. On the other side, China announced that it will be imposing sanctions on Lockheed Martin Corporation LMT after America approved a deal for the supply of missile parts to Taiwan.
Further, the United Kingdom reversed its policy by banning Huawei, joining the United States in banning the Chinese telecommunication giant.
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