Monday July 18th

U.S. stock index futures rose sharply Monday as Goldman Sachs kicked off a busy week of earnings on Wall Street with a report that topped expectations. Futures contracts tied to the Dow Jones Industrial Average added 255 points, or 0.82%. S&P 500 futures gained 0.71%, while Nasdaq 100 futures advanced 0.88%. Those moves come as Wall Street anticipates a slew of major earnings this week, and as traders bet that the Federal Reserve will be less aggressive than feared at its upcoming meeting. More big banks reported earnings Monday following mixed results from JPMorgan Chase and Morgan Stanley last week. Goldman Sachs surpassed earnings expectations on the top and bottom lines, reporting that the firm’s fixed income traders generated about $700 million more revenue than expected. Shares popped 3% in the premarket. Bank of America reported quarterly revenue that beat analyst expectations, though the stock was down slightly in the premarket. IBM will post results after the closing bell. “We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data,” Citi’s Scott Chronert said in a recent note. Despite the growing recession fears, S&P 500 companies are expected to post a 4.2% increase in second-quarter profit, according to consensus analyst estimates gathered by FactSet. S&P 500 members are also expected to post a 10.2% increase in revenue for the period, according to FactSet. Profit expectations for the full year are still high with S&P 500 companies estimated to post a 9.9% earnings increase for 2022, estimates collected by FactSet show. Other major companies set to report earnings this week include Johnson & Johnson, Netflix, Lockheed Martin, Tesla, United Airlines, Union Pacific, Verizon and a host of other firms. Meanwhile, futures Monday also got a boost after Boeing shares gained more than 3% on news that Delta Air Lines was buying 100 737 Max 10 planes. Investors are also betting the Federal Reserve will be less aggressive against inflation than previously feared. A Wall Street Journal report Sunday said the central bank is on track to lift interest rates by 75 basis points at its meeting later this month, instead of the full percentage point increase forecasted by some investors. Goldman Sachs chief economist Jan Hatzius also said in an overnight note that he expected the Fed to raise rates by 0.75 percentage points. The major averages are coming off a losing week, despite a Friday relief rally that saw the Dow jump more than 650 points. The 30-stock benchmark shed 0.16% on the week. The S&P 500 and Nasdaq Composite fell 0.93% and 1.57%, respectively. It was the second negative week in the last three for all the major averages. A batch of economic data drove last week’s wild market action. Inflation jumped 9.1% in June, a hotter-than-expected reading and the largest increase since 1981. That, in turn, led traders to bet that the Fed could raise rates by a full percentage point at its meeting at the end of July. By the end of the week, however, some of those fears retreated on the back of a strong retail sales number as well as comments from some Fed officials. Recession fears have been front and center in recent weeks as market participants worry that aggressive action from the Fed — in an effort to tame decades-high inflation — will ultimately tip the economy into a recession. “Markets are likely to remain volatile in the coming months and trade based on hopes and fears about economic growth and inflation,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a recent note to clients. “A more durable improvement in market sentiment is unlikely until there is a consistent decline both in headline and in core inflation readings to reassure investors that the threat of entrenched price rises is passing,” he added. Hong Kong’s Hang Seng jumped more than 2%, leading gains in Asia-Pacific markets on Monday. Oil futures also rose 2%. The benchmark index in Hong Kong was up 2.7% at 20,846.18 at the close, and the Hang Seng Tech index jumped 3.02%. Mainland China markets advanced. The Shanghai Composite was 1.55% higher at 3,278.10 and the Shenzhen Component rose 0.98% to 12,532.65. The Kospi climbed 1.9% to end the day at 2,375.25 and the Kosdaq was up 1.88% at 776.72. Japan’s market was closed for a holiday Monday. Oil prices extended gains on Monday, propped up by a weaker dollar and tight supplies that offset concerns about recession and the prospect of widespread Covid-19 lockdowns in China again reducing fuel demand. Brent crude futures for September settlement rose 2.6% to $103.78 a barrel, having advanced by 2.1% on Friday. U.S. West Texas Intermediate (WTI) crude futures for August delivery gained 2.2% to trade at $99.73 after rising by 1.9% in the previous session. The U.S. dollar retreated from multiyear highs on Monday, supporting prices of commodities ranging from gold to oil. A weaker dollar makes dollar-denominated commodities more affordable for holders of other currencies. Gold prices firmed on Monday, as a pullback in the dollar helped bullion recover some of its recent losses, while easing fears of a 100-basis-point rate hike by the U.S. Federal Reserve also supported bullion. Spot gold rose 0.8% to $1,720.81 per ounce by 0926 GMT, after falling to its lowest in nearly a year last week. U.S. gold futures also gained 0.8% to $1,717.40.