The major domestic equity indexes closed out the trading day on Monday, with the Dow Jones Industrial Average and S&P 500indexes chalking up their largest gains in more than a month, as bank shares rose ahead of earnings reports later this week.
Industrial, energy and consumer discretionary shares also rose sharply, while S&P utilities and telecommunications – among the market’s recent outperformers – led percentage declines.
Banks in the S&P index were up 2.7 percent, registering their largest daily percentage gain since March 26. The S&P 500 financial index rose 2.3 percent, leading gains among sectors.
JPMorgan Chase, Wells Fargo and Citigroup are scheduled to report results on Friday, kicking off the second-quarter earnings season in earnest.
A stronger economy and plans for more buybacks also are helping bank shares, he said.
Investors may also be shifting their focus for now away from trade tensions between the United States and China. The two countries slapped tit-for-tat tariffs on $34 billion of each other’s goods on Friday.
Helping the Dow was Caterpillar, up 4.1 percent. The S&P industrial sector rose 1.8 percent. Caterpillar and other industrials have been among the hardest hit by recent trade worries.
Twitter fell after the Washington Post reported the social media company suspended more than 70 million fake accounts in May and June, which analysts said could be negative for user growth, but it pared losses after its CFO tweeted that most accounts Twitter removes are not included in reported metrics. The stock ended down 5.4 percent.
The current consensus for S&P 500 second-quarter earnings growth is approximately 21 percent, according to Thomson Reuters data.
Earnings for S&P 500 companies for all of 2018 are likely to come in ahead of expectations due to first-quarter results, higher oil prices and stronger-than-expected economic growth.
Approximately 6.0 billion shares changed hands on the major domestic equity exchanges. That is somewhat under the 7.0 billion daily average for the past 20 trading days, according to Thomson Reuters data.
Bond Boom Is Over
The 10-year Treasury note that debuted in August 2016, when the bond market was near its peak, has had a rough ride. Its price has been declining ever since and no reprieve in sight.
Welcome to the new Treasury market where 75 percent of existing government bonds are now trading below par. Remember that Treasuries are supposed to be risk free investments (because Uncle Sam can print money to pay you).
Despite high demand at auction, the price of the August 2016 bond began falling the day it hit the open market, roughly a month after benchmark 10-year yields reached historic lows.
Now priced at 10 points below face value, it yields 2.833 percent, almost double its record-low 1.50 percent coupon, meaning so far, a negative total return.
Unless prices rebound, fixed income investors could be nursing sustained losses for the first time since a bull market in bonds took hold 30 years ago.
Over the past two decades relief came every time more than half of bonds traded at a discount as that coincided with peaks in Federal Reserve policy rates, which were followed by an easing cycle.