What the Start of Second-Quarter Earnings Means for Stocks

NEW YORK, July 10 (Reuters) – U.S. stocks ended higher on Monday following last week's losses, while Federal Reserve officials' comments bolstered the view that the U.S. central bank may be near the end of its tightening cycle.

The S&P 500 added to slight gains before the close, with caution prevailing for much of the session ahead of Wednesday's consumer prices report and the start of second-quarter earnings later this week.

Investors are anxious to see if price pressures are continuing to moderate. That could shed light on the interest rate outlook, with many traders expecting the Fed to raise interest rates by 25 basis points this month.

Several Fed officials said on Monday additional interest rate hikes are needed to bring down inflation that is still too high, but the end to the U.S. central bank's current monetary policy tightening cycle is getting close.

“The market is obviously poised for the opening of earnings season,” but investors are also hyper-focused on consumer prices and a heavy roster of Fed speakers this week, said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

The outlook for interest rates is “what the market is concerned about,” she added.

S&P 500 company earnings are due to unofficially kick off this week with reports from some big U.S. banks. Analysts expect earnings to have fallen 6.4% in the second quarter from the year-ago period, IBES data from Refinitiv showed.

Traders work on the floor of the NYSE in New York
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 7, 2023. REUTERS/Brendan McDermid

Among the day's best performers, shares of Intel (INTC) rose 2.8% and an index of semiconductors (SOX) was up 2.1%.

The Dow Jones Industrial Average (DJI) rose 209.52 points, or 0.62%, to 33,944.4, the S&P 500 (SPX) gained 10.58 points, or 0.24%, at 4,409.53 and the Nasdaq Composite (IXIC) added 24.77 points, or 0.18%, at 13,685.48.

Icahn Enterprises (IEP) surged 20.2% after the investment firm said Carl Icahn and banks have finalized amended loan agreements that untie the activist investor's personal loans from the trading price of his firm.

Citigroup strategists on Monday downgraded U.S. stocks to “neutral,” and said megacap growth is set for a pullback and U.S. recession risks could still bite.

Volume on U.S. exchanges was 10.20 billion shares, compared with the 11.09 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 2.23-to-1 ratio; on Nasdaq, a 2.06-to-1 ratio favored advancers.

The S&P 500 posted 28 new 52-week highs and four new lows; the Nasdaq Composite recorded 59 new highs and 47 new lows.

Originally published on Reuters.com