U.S. Stocks Show Significant Rebound On Upbeat Earnings, Economic Data

After trending lower over the past several sessions, stocks showed a substantial move back to the upside during trading on Friday. With the strong upward move on the day, the Dow snapped a five-session losing streak.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow spiked 658.09 points or 2.2 percent to 31,288.26, the Nasdaq jumped 201.24 points or 1.8 percent to 11,452.42 and the S&P 500 surged 72.78 points or 1.9 percent to 3,863.16.

Despite the significant rebound on the day, the major averages all moved lower for the week. The Nasdaq slumped by 1.6 percent, the S&P 500 slid by 0.9 percent and the Dow edged down by 0.2 percent.

A positive reaction to the latest earnings news contributed to the rally on Wall Street, as some traders look to pick up stocks at relatively reduced levels.

Shares of Citigroup (C) moved sharply higher after the financial giant reported second quarter earnings that exceeded analyst estimates.

Health insurer and Dow component UnitedHealth (UNH) also posted a strong gain after reporting better than expected second quarter results and raising its full-year guidance.

Shares of Wells Fargo (WFC) also showed a notable move to the upside even though the mortgage banking giant reported second quarter earnings that missed expectations.

Traders also reacted positively to a slew of U.S. economic data, including a report from the Commerce Department showing retail sales jumped by more than expected in the month of June.

The Commerce Department said retail sales shot up by 1.0 percent in June after edging down by a revised 0.1 percent in May.

Economists had expected retail sales to increase by 0.8 percent compared to the 0.3 percent dip originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales still surged by 1.0 percent following a 0.6 percent increase in May. Ex-auto sales were expected to climb by 0.6 percent.

A separate report from the University of Michigan unexpectedly showed a modest improvement in U.S. consumer sentiment in the month of July.

The report showed the consumer sentiment index inched up to 51.1 in July from a record low 50.0 in June. The uptick surprised economists, who had expected the index to edge down to 49.9.

Inflation expectations also eased slightly, with one-year inflation expectations dipping to 5.2 percent in July from 5.3 in June and five-year inflation expectations slipping to 2.8 percent from 3.1 percent.

The Labor Department also released a report showing U.S. import prices crept up by much less than expected in the month of June, with a continued surge in prices for fuel imports partly offset by a decrease in prices for non-fuel imports.

Meanwhile, traders largely shrugged off a report from the Federal Reserve showing an unexpected dip in U.S. industrial production in the month of June.

“U.S. stocks rallied as investors grow optimistic that signs are emerging that inflation is slowing, consumer spending remains healthy, and on a better second day of earnings,” said Edward Moya, Senior Market Analyst and OANDA.

He added, “There still remains a good chance that we will see stocks make fresh lows, but now appears to be the time for some traders to test the waters.”

Sector News

Banking stocks turned in some of the market’s best performances following recent weakness, with the KBW Bank Index spiking by 5.8 percent after ending the previous session at its lowest closing level in well over a year.

Substantial strength also emerged among brokerage stocks, as reflected by the 3.4 percent surge by the NYSE Arca Broker/Dealer Index.

Networking stocks also showed a significant move to the upside, resulting in a 2.8 percent jump by the NYSE Arca Networking Index.

Semiconductor, healthcare, energy and retail stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan’s Nikkei 225 Index rose by 0.5 percent, while China’s Shanghai Composite Index slumped by 1.6 percent.

Meanwhile, the major European markets all showed substantial moves to the upside on the day. While the German DAX Index spiked 2.8 percent, the French CAC 40 Index surged by 2 percent and the U.K.’s FTSE 100 Index jumped by 1.7 percent.

In the bond market, treasuries regained ground following the pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3 basis points to 2.930 percent.

Looking Ahead

Earnings news is likely to take the spotlight next week, with Bank of America (BAC), Goldman Sachs (GS), IBM Corp. (IBM), Johnson & Johnson (JNJ), Netflix (NFLX), Tesla (TSLA), American Express (AXP) and Twitter (TWTR) among a slew of big-name companies due to report their quarterly results.

Reports on housing starts and existing home sales may also attract attention, as traders look ahead to the Federal Reserve’s monetary policy decision the following week.

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