Wall Street posted slight gains on Thursday and the Dow hit another record high close, with financials rising ahead of profit reports due Friday from several large banks. As a result, the financial index was the best performer among the 11 major S&P sectors, ending up 0.61 percent.
Quarterly earnings kick off on Friday with three of the largest banks including JPMorgan Chase, Wells Fargo, and Citigroup reporting results.
Analysts estimate second-quarter earnings for S&P 500 companies rose 7.8 percent from a year ago, with financials projected to have had the third-best profit growth among sectors, according to Thomson Reuters I/B/E/S.
Over the last seven trading days, investors have more than doubled the amount of cash invested in a key financial sector fund, betting that second-quarter bank earnings will be strong.
Federal Reserve Chair Janet Yellen told a Senate panel on Thursday that it would be “quite challenging” for GDP growth to reach a 3-percent target set by President Donald Trump.
The S&P 500 healthcare index was up 0.09 percent, barely moving on news of Senate Majority Leader Mitch McConnell’s unveiling of a revised healthcare bill.
Hospital and insurer groups have been vocal against proposed Medicaid cuts which could result in lower revenues for hospitals like Community Health Systems and Medicaid insurance specialists like Molina Healthcare and Centene.
Investors are eager to move past the healthcare bill and onto comprehensive tax reform, though Congress’s ability to address it soon are in doubt.
Target Corp rose 4.8 percent after an upbeat second-quarter forecast. The news raised other retailers, with Wal-Mart up 1.5 percent and Costco edging up 1.2 percent.
Delta Air Lines on Thursday reported a 21 percent decline in second-quarter earnings because of sharply higher operating costs, despite higher passenger unit revenue, sending its shares down about 1.8 percent.
Approximately 5.8 billion shares changed hands on the major domestic equity exchanges, a number that was below the 6.8 billion daily average for the past 20 trading days, according to Thomson Reuters data.
Wall Street Bullish on Banks
Over the last seven trading days, the amount of cash invested in a key financial sector fund has more than doubled. It is a bet that second-quarter bank earnings will be robust.
The large banks begin reporting quarterly results on Friday and according to data from State Street, the Financial Select Sector SPDR Fund, which tracks the S&P 500 Financials sector, has pulled in a net $662 million of inflows, bringing the year-to-date inflows to nearly $1.5 billion. Year-to-date, the Financial Select ETF is up 7.6 percent to $25.01.
Shares in the largest banks rose at the end of June after they unveiled buyback and dividend plans that topped analyst expectations after the Fed approved capital proposals in its annual stress test program.
Some of the fund’s top holdings, JPMorgan Chase, Citigroup, and Wells Fargo, report results on Friday and others, including Goldman Sachs, Morgan Stanle and Bank of America will post results next week.
Second-quarter earnings for S&P 500 financial companies rose 7 percent, the third-best growth for a sector after energy and technology, according to Thomson Reuters data.
Longer-dated Treasury yields are up this month while shorter-dated yields have either inched higher or fallen, resulting in a so-called “steepening” of the yield curve.
A steeper yield curve benefits bank profitability since it allows banks to borrow at lower short-term rates and lend at higher long-term rates.
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