Quarterly earnings are dominating the stock market today, and in a good way, after banking mammoth Citigroup reported better than expected results, boosting financial stocks in general and helping to push the Dow Jones Industrial Average to a record level.
By Peter Martin
Monday, July 14, 2014
Though Citigroup’s second-quarter earnings fell heavily from the year-ago comparison, thanks to a pre-tax charge of $3.8 billion related to a settlement deal with the Justice Department, the company’s adjusted earnings of $1.24 a share comfortably exceeded the Wall Street consensus estimate of $1.05. Similarly revenue declined, but still beat forecasts. Shares in Citigroup rose 3.8% by the afternoon in New York, and financial shares enjoyed a broad lift, helping the major benchmarks to advance. The S&P 500 rose 0.53% or 10.5 points to 1978.1, while the DJIA surged 0.72% or 121 points to 17,065. The DJIA had climbed as high as 17088.43 earlier in the session, setting a new all-time intraday high.
Earnings are likely to continue to strongly influence proceedings this week, with Dow components Goldman Sachs, JP Morgan, Intel and Johnson & Johnson all reporting tomorrow.
Other factors helping to stoke risk appetite today include Goldman Sachs upwardly revising its 2014 forecast for the S&P 500 index from 1900 to 2050, citing rising earnings and the increasing pace of economic growth, and a rash of merger & acquisition stories. Aecom Technology announced it is set acquire engineering firm URS Corp for around $4 billion; drugmaker Mylan Inc said it will purchase Abbot Laboratories’ generic drug business in developed markets outside the US; and Kindred Healthcare has upped its hostile takeover attempt of Gentive Health Services to an offer of $16 per share from an earlier proposal of $14.50 a share.
The ‘risk-on’ sentiment that has suffused the financial markets today has served to reduce the appeal of those assets considered to be safe-havens, such as gold, silver and the Japanese yen. Spot gold slipped 2.45% to $1305.7 per ounce, silver dropped 2.66% to $20.71 per ounce, while the dollar strengthened 0.32% against the yen.
The euro was little changed against the dollar despite ECB President Mario Draghi speaking on monetary policy in front of the European Parliament. In a subsequent press conference Mr Draghi said the ECB is ‘extremely attentive’ to the possibility of monetary policy creating asset bubbles, but sees no evidence of increased levels of leverage, despite property prices in some parts of the euro area looking ‘frothy’. Therefore, Mr Draghi said, the governing council doesn’t see a situation of systemic bubbles and the current monetary policy stance is appropriate.
The economic calendar is a lot busier tomorrow, with import and export prices, retail sales and Empire State manufacturing all due for release before the stock market opens in New York. Retails sales are expected to have grown 0.6% in June, which would be a pick-up in pace from the 0.3% seen in May.
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