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Stock market today: Dow, S&P 500 build on records as a retail sales surprise fuels rate cut hopes

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US stocks opened higher on Tuesday, as investors assessed big bank earnings and a retail sales surprise amid growing conviction an interest-rate cut is near.

The Dow Jones Industrial Average (^DJI) rose roughly 0.5% shortly after the opening bell, after the blue-chip index topped 40,000 to notch an all-time closing high. The S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) were each up more than 0.3% on the heels of their own daily wins.

Earnings season picked up pace before the bell, with Bank of America (BAC) and Morgan Stanley (MS) the latest to report. BofA quarterly profit fell but beat estimates, while MS profit jumped, both offering signs of an investment banking revival. Results from Charles Schwab (SCHW) and UnitedHealth (UNH) are also on Tuesday’s docket.

More broadly, stocks are holding onto gains after chair Jerome Powell signaled the Federal Reserve is gearing up to start lowering rates soon, given recent solid inflation prints.

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Retail sales came in flat but better than expected in June, data out Tuesday showed, adding to the easing in price pressures that have boosted faith in a September cut — a prospect that has already wakened wider bullishness for stocks beyond techs. Traders were pricing in a 100% likelihood the Fed will bring down borrowing costs that month, according to CME FedWatch data.

But some lawmakers have warned a Fed pivot before November’s presidential election could be seen as a partisan move.

At the same time, political matters continued to preoccupy a market betting that former President Donald Trump is an even clearer front-runner for the White House after he survived an assassination attempt over the weekend. The Republican candidate’s pick of Sen. J.D. Vance as his running mate is seen as strengthening his chances.

Live5 updates

  • Tue, July 16, 2024 at 10:18 a.m. EDT

    Homebuilders sentiment falls to lowest level since December amid high mortgage rates

    Homebuilders are feeling worse about the housing market as persistently high mortgage rates curtail sales.

    The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell one point to 42 in July, marking the lowest level since December. July’s reading was lower than economists’ estimates of 43, per Bloomberg data.

    Any number under 50 indicates that more builders view conditions as poor versus good.

    A high cost of borrowing has kept both potential buyers and sellers on the sidelines. New home sales hit a six-month low in May, according to the latest data available from the Census Bureau.

    Mortgage rates have hovered around 7% this year. The national average on the 30-year, fixed-rate mortgage fell to 6.89% last week from 6.95% a week prior, Freddie Mac reported.

    There are signs, though, that inflation is easing, making it more likely the Federal Reserve will cut interest rates sooner rather than later. Markets are widely betting on a September rate cut.

    “Though inflation is still above the Federal Reserve’s target of 2%, it appears to be back on a cooling trend. NAHB is forecasting Fed rate reductions to begin at the end of this year, and this action will lower interest rates for home buyers, builders and developers,” NAHB Chief Economist Robert Dietz said in a press release. “And while home inventory is increasing, total market inventory remains lean at a 4.4 months’ supply, indicating a long-run need for more home construction.”

  • Tue, July 16, 2024 at 10:18 a.m. EDT

    Why the consumer (and earnings) could derail stock market’s rally

    The stock market’s record-setting rally comes alongside hopes the Federal Reserve will begin to cut interest rates in September.

    Traders are pricing in a 100% chance rate cuts come that month, according to CME FedWatch data.

    But the consumer could derail that plan, one strategist warned.

    “The consumer is so incredibly important — 70% of our economy,” Matt Maley, managing director at Miller Tabak, told Yahoo Finance on Tuesday. But he said “things have been trending in the wrong direction,” citing high credit card debt with delinquency rates starting to pick up as well.

    “It’s one thing for interest rates to go down because inflation is coming down but it’s a whole other thing if it’s starting to show we’re heading towards a recession or even a meaningful slowdown in economic growth,” he said.

    Retail sales in June surprised to the upside with sales coming in flat for the month, defying Wall Street’s prediction of a decline. But the future of the rally will not just depend on economic data. It will also depend on earnings, with sales and profitability top of mind.

    Maley said it’s “incredibly important” S&P 500 companies not only beat earnings expectations but also raise guidance “because we’re at a stock market trading at 22x earnings.”

    In other words, a pullback might be on the horizon if guidance disappoints.

  • Tue, July 16, 2024 at 9:35 a.m. EDT

    Dow, S&P 500 add onto records as stocks open higher

    US stocks moved higher on Tuesday, as investors assessed fresh big bank earnings and a surprise retail sales report — all while investors appear more and more confident that an interest rate cut is near.

    The Dow Jones Industrial Average (^DJI) rose roughly 0.5%, after the blue-chip index topped 40,000 to notch an all-time closing high. The S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) were each up more than 0.3% on the heels of their own daily wins.

  • Tue, July 16, 2024 at 9:07 a.m. EDT

    Retail sales come in better than expected in June

    Retail sales were flat in June, defying Wall Street’s prediction of a decline amid signs of slowing in the US economy.

    Economists had expected a 0.3% decline in spending, according to Bloomberg data. Meanwhile, retail sales in May were revised higher to an increase of 0.3%, from a prior reading of 0.1%, according to Census Bureau data.

    June sales, excluding auto and gas, grew by 0.8%, above consensus estimates for a 0.2% increase. The control group in Tuesday’s release — which excludes several volatile categories and factors into GDP for the quarter — rose 0.9% in June, above estimates for a 0.2% gain.

    “Although retail sales were unchanged in June, the strong 0.9% [month-over-month] rise in control group sales should ease concerns about the plight of the consumer in the wake of the renewed slump in sentiment,” Capital Economics chief North America economist Paul Ashworth wrote in a note to clients. “Admittedly, both second-quarter consumption and GDP growth still appear to have been no better than 2% annualised, but the strong gain in June does set up for a better third quarter performance.”

  • Tue, July 16, 2024 at 8:17 a.m. EDT

    The high expectations on Netflix

    Expectations on Netflix (NFLX) earnings later this week are on the high side, to say they very least. It makes sense as the company’s business has clearly kicked into a new gear the past two quarters.

    Even still, you have to wonder if expectations are TOO high and no matter what Netflix reports on Thursday, it will be seen as a letdown.

    An example of what I am talking about is Jefferies analyst James Heaney, with this line in his earnings preview report this morning:

    “We are raising our subscriber estimate for 2Q24 by ~18% to 5.8M net adds vs 4.9M previously and our fiscal year estimates to 28.3M.”