The mild pushback I was expecting to emerge at the outset of the week did in fact materialize but only in that US equity markets paused in their march higher. As anticipated, given all the variables that have been removed from the equation in recent weeks and that we have touched on, the fuel that has triggered additional rotation into equities has been Q2 earnings and forward looking guidance.
Initially it was the financials that provided the lift to equity prices that we have seen this earnings season. The lift this week is being provided by large cap tech. For example, Microsoft stunned investors after the close on Tuesday by delivering much better than expected quarterly earnings and revenue results, and by providing further investor encouragement with solid forward guidance. In the process on Wednesday MSFT rallied nearly 5% on above average volume. Being one of the largest caps in the Nasdaq, MSFT’s outperformance lifted the Nasdaq and tech sector with it.
IBM added 1.61% on the day as well, and in the process has posted 11 winning sessions out of the last 14. TXN inched higher by .69% continuing its weeks long climb. INTC beat consensus EPS but missed on revs. QCOM reported better than expected sales and earnings results, after the bell yesterday, and as a result shares rocketed 7% higher in after hours trading. All-in-all it was a good day for equities, particularly tech names.
All three majors added to recent gains on expanding volume yesterday. The Nasdaq (+1.06%) led the way, in large part due to the leadership provided by the tech sector. The S&P gained 0.43% and the Dow Industrials tacked on 0.19%. Volume on the Nasdaq expanded by 10.85% while the NYSE saw volume rise by 7.46%.
Though, as expected, earnings are in focus at the moment, the undercurrent provided by this week’s economic calendar has also played a part in the massive trade higher. Tuesday’s Housing Starts data for June were slightly better than expected at 1.189 M versus the prior month’s revised reading of 1.135 M. Yesterday’s EIA Petroleum Status Report continued to reflect tightening crude inventories with a weekly draw of 2.3 M barrels. Gasoline inventories were in-line with last week’s reading but importantly Distillate inventories tightened modestly (-0.2 M barrels) versus last week’s 4.1 Mbbl surge.
Data standouts to weigh in on the markets will be Weekly Jobless Claims (consensus 265K), the Philly Fed Business Outlook (C 5.0), Chicago Fed National Activity Index reading, FHFA House prices (C 0.4%), Existing Home Sales (C 5.475M) and Leading Indicators (C 0.3%).
Earnings, data, and as a result investor confidence, have all acted in concert to provide further lift for markets as they attempt to post additional record closing highs and their best monthly gain of the year.