The Standard & Poor's 500 hit an all-time intraday high Friday, the fifth straight day of record highs for the index. Stronger-than-expected results from Dow component JPMorgan Chase as well as upbeat economic data, strong retail sales and general positive sentiment for U.S. stocks helped to move the averages higher.
U.S. retail sales rose more than expected in June as Americans bought motor vehicles and a variety of other goods, bolstering views that economic growth picked up in the second quarter. In addition, industrial production rose 0.6 percent in June, recording its biggest increase in 11 months, driven by a surge in motor vehicle assembly.
JPMorgan set a positive tone for bank earnings topping estimates. Fixed-income revenue growth of 35 percent was the standout on strength in rates and currencies. Loan growth was solid (up 16 percent), consumer deposits hit a record growth rate of 10 percent and credit card sales were up 8 percent. Citigroup, Wells Fargo, U.S. Bancorp and PNC also reported earnings. Three of the four financials beat expectations, with Wells Fargo being the only one that met the consensus estimate.
Momentum in crude oil has reined in a bit as concerns about a global glut in crude and refined products weighed on the commodity while supply comes back on the market from Nigeria and Canada and demand is not as strong as expected. Inventories remain historically high after two years of surplus production, and U.S. demand for gasoline, the key driver of prices in summer, is proving to be disappointing, according to the International Energy Agency.
Week ahead
On Monday, the Republican National Convention opens in Cleveland, Ohio. The confirmation of Donald Trump as the party's presidential nominee is expected to take place July 21. Trump announced that Governor Mike Pence of Indiana would be his running mate.
Earnings are now in full swing as 88 companies from the S&P 500 will deliver results, with major financials set to report, including Bank of America, Goldman Sachs, American Express and Morgan Stanley. Tech heavyweights IBM and Microsoft are also on tap, as well as widely-traded stocks Netflix, Starbucks and Yahoo. Global conglomerates General Electric and Honeywell close out the week.
Chipotle Mexican Grill reports next Thursday after the market closes, and the sales recovery could take longer than expected. Customers are still wary about returning to the chain in the wake of food safety woes that surfaced last year.
Analysts at Morgan Stanley downgraded the stock ahead of the earnings report: “We are downgrading CMG to Equal Weight from Overweight based on new evidence that the sales recovery will remain more protracted than the market believes, and possibly more costly as a result, as CMG likely needs to ramp up marketing spend to lure consumers back in. A full sales recovery to prior peak volumes could take years in our view.”
The Housing Market Index for July and Purchasing Managers’ Manufacturing Index are the pieces of economic data in focus.
The European Central Bank rate decision and press conference will take place before U.S. markets open Thursday. This will be the first scheduled monetary policy meeting since the historic Brexit vote was held in June.
