Stock Market Gains Momentum on Positive Bank Results

Key Highlights

1. Bank of America and Morgan Stanley report strong Q2 earnings.
2. Dow achieves a seven-session streak of gains.
3. June retail sales up 0.2% compared to the estimated 0.5%.
4. Dow up 1.06%, S&P 500 up 0.71%, Nasdaq up 0.76%.

According to a report by Reuters, U.S. stocks showed positive momentum on Tuesday, largely driven by impressive bank earnings, leading the Dow towards its longest streak of daily gains in over two years. Notably, Morgan Stanley (MS.N) witnessed a significant surge of 6.45%, marking its highest single-day percentage climb since November 9, 2020. This increase was driven by strong growth in the bank's wealth management business, which compensated for lower trading revenue. In the below chart showing the report of Morgan Stanley Earning:

source from Reuters

Bank of America (BAC.N) also experienced a gain of 4.42% after surpassing profit expectations, primarily due to increased earnings from customers' loan payments, and better-than-expected performance in investment banking and trading.

Other banks, including Bank of New York Mellon (BK.N) with a 4.11% increase, and PNC Financial (PNC.N) with a 2.51% increase, witnessed a rise in their stock prices following the release of their quarterly results.

Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, commented, "They are surprising. This morning all the banks reported, all beat earnings expectations and all except PNC beat revenue expectations. I always hate to extrapolate the big bank earnings, which are always the first ones, to the rest of the market. We have a lot more coming here, but earnings estimates have been brought down, and banks are able to surprise."

The Dow Jones Industrial Average (.DJI) surged by 366.58 points or 1.06% to reach 34,951.93, while the S&P 500 (.SPX) increased by 32.19 points or 0.71% to reach 4,554.98. The Nasdaq Composite (.IXIC) added 108.69 points or 0.76% to reach 14,353.64.

With the Dow achieving its seventh-straight session of gains, it experienced its longest streak since March 2021 and closed at its highest level since April 2022.

Major U.S. banks, including JP Morgan (JPM.N), have reported a profit boost from higher rates and indicated that the economy remains resilient.

The S&P 500 banks index (.SPXBK) closed 1.90% higher at 317.02, reaching its highest closing level since March 8. The KBW regional banking index (.KRX) also saw a climb of 4.10% to 96.25, its highest close since March 21.

Charles Schwab (SCHW.N), the best performer on the S&P 500, observed a notable increase of 12.57% after posting a smaller-than-expected drop in quarterly profit.

The technology sector (.SPLRCT) was the best-performing sector, with a 1.26% increase. Microsoft (MSFT.O) shares rose by 3.98%, reaching a record close of $359.49, following the announcement that the company would charge more for access to new artificial intelligence features in its Office software.

Equities have recently experienced a rally, with the S&P 500 and Nasdaq reaching 15-month highs. This surge can be attributed to data indicating economic resilience, stable inflation, and a strong labor market.

Data released early on Tuesday revealed that retail sales in June had increased less than expected, mainly due to a decline in building materials and service station receipts.

However, consumer spending remained steady or slightly increased. Additionally, production at domestic factories unexpectedly declined during the month but rebounded in the second quarter as motor vehicle output accelerated.

UnitedHealth (UNH.N) also contributed to the Dow's positive performance, rising by 3.29% and adding approximately 105 points. This increase came after Bernstein upgraded the health insurer to an "outperform" rating.

The total volume of shares traded on U.S. exchanges amounted to 10.54 billion, slightly below the 10.58 billion average for the full session over the last 20 trading days.

On the NYSE, advancing issues outnumbered decliners with a ratio of 2.76-to-1. On Nasdaq, the ratio favored advancers with a ratio of 1.62-to-1.

The S&P 500 recorded 53 new 52-week highs and three new lows, while the Nasdaq Composite achieved 157 new highs and 75 new lows.

By delivering strong bank earnings, the stock market experienced a notable boost, propelling the Dow to achieve its seventh consecutive day of gains. With positive performance across various sectors, such as technology, and signs of economic resilience, the market continues to exhibit a positive outlook.