US retail sales growth in June was lackluster, but core retail remained strong. The market still expects a rate hike in July, which is believed to be the last one. The Dow Jones Industrial Average (DJIA) has experienced its longest consecutive gains since March 2021, with Microsoft leading the way with a 4% increase, driving up the overall performance of AI-related stocks. Bank of America, with positive earnings reports, rose over 4%, while Morgan Stanley and JPMorgan Chase rose over 6% and 12% respectively, marking the largest increase since March 2020. These gains have nearly recovered the losses incurred during the March crisis. Regional bank stocks also rose over 4%, reaching a four-month high. Chinese concept stocks index fell 4% to a one-week low during the trading session. US bond yields experienced a V-shaped reversal, with short-term yields rising towards the end of the day, while European bond yields dropped more than 10 basis points. After hitting a 15-month low, the US dollar rebounded, while the euro rose for eight consecutive days before turning downward, missing the chance to achieve its longest upward trend in nearly twenty years. Gold rose over 1% to reach a two-month high during the trading session, corn futures rose over 5%, and Brent crude oil rose nearly 3% and briefly surpassed $80.
US retail sales in June increased by 0.2% MoM, weaker than expected and the revised previous value of 0.5%. However, core retail sales, excluding automobiles, gasoline, building materials, and food services, exceeded expectations with a MoM growth of 0.6%, indicating that consumer spending remained resilient at the end of the second quarter.
This scenario has fully factored in the possibility of a 25 basis point rate hike by the Federal Reserve next week, causing the US dollar index to rebound from a 15-month low and rise above the psychological level of 100. However, mainstream expectations on Wall Street, including Goldman Sachs, still suggest that July will be the last rate hike by the Federal Reserve.
US Treasury Secretary Yellen stated that the strength of US hiring demand has declined, which, along with housing costs and car prices, contributes to a slowdown in inflation. Goldman Sachs has lowered the probability of a recession in the US in the next 12 months from 25% to 20% due to better-than-expected economic data.
In other data, the NAHB Housing Market Index in the US rose to 56 in July, reaching a 13-month high. The confidence of single-family home builders has risen again due to tight supply of existing homes. However, industrial and manufacturing output in the country both declined more than expected MoM in June.
Klaas Knot, a hawkish member of the European Central Bank's governing council, expressed close attention to signs of cooling inflation in the coming months in order to avoid excessive rate hikes. He believes that a rate hike in July is necessary, but it is uncertain whether further rate hikes will follow. The dovish sentiment has caused European bond yields to plummet by more than 10 basis points.
The market is also paying attention to inflation data from the Eurozone, the UK, Japan, and other regions this week to obtain further clues on whether global inflation is cooling down. The Bank of England's violent rate hike of 50 basis points on August 1st is considered a done deal.
Dow Jones Industrial Average Rises for Seven Consecutive Days, Three Major Indices Reach 15-Month High, Microsoft and NVIDIA Hit Record Highs, Jiaxin Wealth Management Rises Over 12%
On Tuesday, July 18th, despite lower-than-expected growth in US retail sales in June, the US stock market opened low but rallied due to overall positive earnings reports from major financial institutions such as Bank of America and Morgan Stanley. The Dow Jones Industrial Average (DJIA) rose for seven consecutive days, marking the longest winning streak since March 2021, while the Russell 2000 Index outperformed with a gain of over 1% for the day.
Less than an hour after the market opened, the DJIA extended its gains to 200 points, and the S&P 500 Index turned positive and reached its highest level in 15 months since April 2022. At midday, the DJIA reached a high of 400 points and approached the 35,000 level, while the Nasdaq also showed strong upward momentum.
US stocks closed near their daily highs, with both the S&P 500 and Nasdaq rising for the sixth consecutive day within seven trading days, reaching their highest levels in 15 months since April last year. The Russell 2000 Index rose for the seventh day within eight trading days, hitting its highest level in over five months:
The S&P 500 Index closed up 32.19 points, or 0.71%, at 4,554.98, approaching the closing level of 4,582.64 on April 4, 2022, and the all-time closing high of 4,796.56 on January 3 of the same year. The DJIA closed up 366.58 points, or 1.06%, at 34,951.93. The Nasdaq closed up 108.69 points, or 0.76%, at 14,353.64. The Nasdaq 100 index rose 0.82%, and the Russell 2000 small-cap stock index rose 1.27%.
The Nasdaq rose during midday trading, reaching its highest level in 15 months since April last year, along with the S&P 500 index and the Dow Jones Industrial Average.
Most of the 11 sectors of the S&P closed higher, with the information technology/tech sector rising 1.3%, leading for the second consecutive trading day. The financial and energy sectors rose by about 1%, while materials and healthcare rose by over 0.7%. Telecommunications services rose nearly 0.4%, and consumer discretionary rose nearly 0.3%. Defensive utilities and real estate sectors fell by about 0.8%.
Most of the popular tech stocks rose. "Metaverse" Meta rose 0.5% in the final trading session, while Amazon fell 0.6%, Google A fell 0.7%, and Apple fell 0.1%, breaking away from its all-time high. Tesla fell 1.5% but then rose by over 1%, reaching its highest level in ten months after a six-day consecutive rise. After Wednesday's after-hours earnings report, Netflix rose 5.5% to its highest level in 18 months, and Microsoft rose 4% to its all-time high, driving up AI concept stocks.
Microsoft rose 4% to its all-time high, driving up AI concept stocks.
Chip stocks rebounded in the final trading session. The Philadelphia Semiconductor Index, which rose over 2% yesterday, turned up 0.1%, hitting an 18-month high. AMD narrowed its decline to 0.3%, and Intel, which rose nearly 4% yesterday, rose 0.4%, reaching a new monthly high. Nvidia continued to rise by over 2%, setting a new all-time high.
Nvidia continued to rise by over 2%, setting a new all-time high.
AI concept stocks rose across the board. C3.ai rose nearly 5% to a one-week high, Palantir Technologies rose nearly 4%, reaching its highest level in a year and a half since the end of 2021, and SoundHound.ai rose 3%, further distancing itself from its one-month low. BigBear.ai rose 0.5%.
In other news, Microsoft announced the pricing of its enterprise AI software tools at its partner conference. It was reported that Nvidia is close to reaching a stock deal with cloud computing startup Lambda Labs, with a valuation of over $1 billion. The National Highway Traffic Safety Administration in the United States has launched a new special investigation into a fatal Tesla accident involving a 2018 Model 3 suspected of using the autopilot system. Popular Chinese concept stocks fell sharply in the final trading session. The ETF KWEB dropped nearly 4%, CQQQ dropped nearly 3%, and the Nasdaq Golden Dragon China Index (HXC) fell 4% before closing down 3.3%, breaking through the 7,000 and 6,900 points to a one-week low. Last Thursday, it reached its highest level in over three months.
Among the Nasdaq 100 constituents, JD.com fell 4.6%, Baidu fell 3.6%, and Pinduoduo fell 4.3%. Among other individual stocks, Alibaba fell over 2%, Tencent ADR fell 4%, Bilibili fell 6.5%, NIO fell over 1%, Xiaopeng Motors turned up nearly 2%, and Li Auto fell nearly 3%. Goldman Sachs is bullish on Baidu, stating that it is the future AI traffic entrance and its stock price could rise by another 31%.
Bank stocks surged. The industry benchmark, the KBW Bank Index (BKX) on the Philadelphia Stock Exchange, rose 3% to a three-month high. On May 4th, it hit its lowest level since October 2020. The KBW Nasdaq Regional Banking Index (KRX) rose over 4% to a four-month high since March 21st, hitting its lowest level since November 2020 on May 11th. The SPDR S&P Regional Banking ETF (KRE) rose over 4%, marking the largest increase in over a month and the highest level since March 21st. On May 4th, it hit its lowest level since October 2020.
The "Big Four" U.S. banks all rose, with Bank of America leading the way with a rise of over 4%. Goldman Sachs, which will release its financial report tomorrow, rose 3%, and Morgan Stanley rose over 6%. Among key regional banks, PacWest Bancorp and Western Alliance Bancorp rose over 8%, Zions Bancorporation rose over 3%, and Keycorp rose 4%.
Morgan Stanley rose the most, up over 7%, marking the largest increase since March and the highest level since March 9th.
The performance of major U.S. banks is a mix of "good and bad." Bank of America's net profit in the second quarter increased by 19% year-on-year, while JPMorgan Chase's net profit declined by 13% but overall performance exceeded expectations. Goldman Sachs will announce its financial report on Wednesday, marking the end of this round of earnings season for major banks:
Morgan Stanley's second-quarter earnings and revenue both exceeded expectations, benefiting from record-high revenue in its wealth management business. It rose over 7% at its highest point, marking the largest increase since March and the highest level since March 9th, nearly recovering all the losses since the Silicon Valley Bank's collapse on March 8th.
Bank of America's second-quarter earnings and revenue both exceeded expectations, with a 19% year-on-year increase in profit and an 11% increase in revenue. This was due to a 14% year-on-year increase in net interest income in the rising interest rate environment. Its stock price rose by 5% to the highest level since March 8th.
Leading asset management giant Jiaxin Wealth Management saw its highest increase of over 14%, closing with a gain of over 12%, marking the largest surge since March 2020. This has brought its year-to-date decline to less than 20% and reached its highest point since March 9. It is expected that its revenue will decline by 7%-8% this year, but bank deposits will recover growth by the end of the year. In addition, second-quarter net revenue and adjusted earnings per share are both higher than expected.
In other news, Fuguo Bank stated that the rebound in stock prices after the release of the financial report by ALENS Western Bank on Tuesday had a relatively low threshold. Currently, the stock price has more than doubled from its lowest point this year in early May, but it is still down 30% for the year. Morgan Stanley predicts that BlackRock's assets under management will expand to $10 trillion in the next few quarters, and the stock price is expected to rise by about 22% from Monday.
European stocks rose across the board, with the pan-European Stoxx 600 index closing up 0.62%, approaching its monthly high. Telecommunications stocks fell by nearly 1%, while chemical and retail stocks rose by over 1%. The Russian MOEX index rose by about 1.2%, reaching a new 17-month high.
Among them, British grocery delivery company Ocado surged by 19%, turning its pre-tax depreciation and amortization profit (EBITDA) from a loss to a profit in the first half of the year, and refused to respond to rumors of being acquired by Amazon. Swiss healthcare company Novartis rose by 4.6%, raising its full-year profit forecast and approving the spin-off listing of its generic drug division, Sandoz. It will complete a $15 billion stock buyback by the end of 2025.
U.S. Treasury Yield Curve Inverted, Short-Term Bond Yields Rise in Late Trading, European Bond Yields Fall by More Than 10 Basis Points
U.S. Treasury yields collectively declined at the beginning of the session due to poor retail sales and a cooling trend in inflation, leading the market to speculate that the Federal Reserve's current interest rate hike cycle will end after July. Short-term bond yields in the U.S. rose during midday trading.
The two-year yield, which is more sensitive to monetary policy, initially fell by 7 basis points to 4.66% and then rose by more than 3 basis points to 4.77%. The 10-year benchmark bond yield maintained a decline of over 1 basis point to 3.78%, after previously falling by more than 6 basis points to 3.73%.
U.S. Treasury Yield Curve Inverted, Short-Term Bond Yields Rise in Late Trading
As some hawkish members of the European Central Bank suggested that the interest rate hike cycle should end after July, European bond yields quickly deepened their decline, with benchmark bond yields in major countries falling by more than 10 basis points. However, the money market's expectations for the peak interest rate of the European Central Bank remained largely unchanged, still slightly below 4%.
The 10-year German bond yield, which serves as the benchmark for the eurozone, fell by 10 basis points to 2.38% during the session, while the two-year yield fell by 13 basis points in late trading, approaching the psychological level of 3.0% and a one-month low. The 10-year UK bond yield fell by 10 basis points. The 10-year Italian government bond yield, which is deeper in debt than peripheral countries, fell by 15 basis points and approached 4%.
Brent crude oil rose nearly 3% during the session and briefly surpassed $80, while WTI crude oil rose more than 2% to move away from a one-week low, and European natural gas rose more than 7%
The weakening of the US dollar, coupled with the possibility of tightening US oil inventories, led to a 2% increase in international oil prices.
WTI August crude oil futures closed up $1.60, or 2.16%, at $75.75 per barrel. Brent September futures closed up $1.13, or 1.44%, at $79.63 per barrel.
The most actively traded WTI September futures for US crude oil rose by $1.74 or 2.3%, reaching $76, while Brent rose by $2.14 or 2.7%, briefly surpassing the psychological level of $80, ending a two-day decline and moving away from a one-week low.
Brent crude oil rose nearly 3% during the session and briefly surpassed $80, moving away from a one-week low
Oil prices fell 1.7% yesterday after three consecutive weeks of gains, reaching the highest level since April this year. In addition to the OPEC+ production cuts, short-term data supporting oil prices include: US shale oil production is expected to decline monthly for the first time since December last year in August.
At the end of the day, the TTF Dutch natural gas futures, the European benchmark, rose more than 7%, still below the integer level of 30 euros per megawatt-hour, after hitting a six-week low since early June yesterday. ICE UK natural gas rose more than 9%, after hitting the lowest level in nearly two years since September 2021 yesterday.
Although European natural gas prices have fallen by 90% from the peak of the energy crisis in August last year, and EU natural gas reserves have exceeded 80%, nearly 20 percentage points higher than the five-year average, the International Energy Agency (IEA) still warns that if Russia completely cuts off pipeline supplies, Europe may face another natural gas crisis this winter.
After hitting a 15-month low, the US dollar rebounded and surpassed 100, while the euro rose for eight consecutive days but then fell, missing the longest winning streak in nearly 20 years
The US dollar index DXY, which measures against six major currencies, hit its lowest level since April last year after the release of poor retail data. Under the influence of expectations of an interest rate hike in July, US stocks rebounded and rose above the 100 level, with the largest weekly decline this year.
The US dollar rebounded and surpassed 100 after hitting a 15-month low.
The euro against the US dollar fell but remained above 1.12, reaching a high of 1.1276 earlier, the highest since February last year. As the market expects the European Central Bank to end its rate hike cycle later than the Federal Reserve, the euro against the US dollar fell after rising for eight consecutive days, potentially setting a record for the longest rally in nearly twenty years.
The British pound against the US dollar also fell 0.2% and retreated from above 1.31, still hovering around the highest level since April last year, which was reached last Thursday. The yen against the US dollar fell back below 139, after reaching a two-month high of 137 last Friday. Offshore renminbi fell below 7.19 yuan, down 180 points from the previous day's close, returning to a one-week low.
Mainstream cryptocurrencies fluctuated. Bitcoin, the largest cryptocurrency by market capitalization, fell more than 1% and dropped below $30,000, while the second-largest cryptocurrency, Ethereum, fell 0.2% and dropped below $1,890. Ripple, which surged 70% last Thursday, rose nearly 4% after a 10% plunge since last Friday.
Gold rose more than 1% and briefly reached $1,980, the highest level in nearly two months, while industrial metals continued to fall and corn futures rose more than 5%.
The decline in the US dollar and US bond yields at the beginning of the session boosted gold prices. COMEX August gold futures closed up 1.25% at $1,980.80 per ounce, reaching a high above $1,988 during the day, and silver futures rose 1% at one point.
Spot gold rose nearly $30 or 1.5%, breaking through $1,970 and briefly reaching the $1,980 level, surpassing the 50-day moving average, and reaching a new high in nearly two months since May 24.
Some analysts believe that the market expects the end of the Federal Reserve's rate hike cycle, and it will be difficult for gold prices to fall below the new support level of $1,950 in the short term. Other major central banks in Europe and the United States have not yet completed their rate hike cycles, and the US dollar may continue to be under pressure, which is beneficial to gold prices. However, US interest rates will not decline in the short to medium term, which will limit the ultimate upside of gold prices.
The outlook for demand continues to weigh on London industrial base metal prices:
The "Copper Doctor" fell 0.2% further away from the $8,500 level, after a 2.1% drop on Monday, breaking away from a two-and-a-half-month high and marking the largest drop in over three weeks. London zinc, which fell more than 1% yesterday, fell another 0.6% and dropped below $2,400, further below the one-month high, with LME registered warehouse inventories increasing by 15% to the highest level in nearly three weeks.
London aluminum, which fell 1% yesterday, fell another 2.3%, approaching $2,200, further distancing itself from a six-week high. London lead, which fell over 1% yesterday, fell slightly and lost the $2,100 mark, further moving away from a three-week high. However, London nickel, which fell nearly 3% yesterday, rebounded slightly, and London tin, which fell 0.6% yesterday, also rose 0.6%, reaching a near six-month high last week.
Chicago corn futures surged more than 5% as the Black Sea Grain Corridor agreement was interrupted. Poland, Slovenia, Hungary, and other countries are pushing for the European Union to strengthen the ban on grain exports from Ukraine. The Bloomberg Grains Subindex rose by about 3%, and CBOT wheat futures rose more than 2%.