Not all the news is necessarily bad, however. Over in the financial sector, Goldman Sachs Group Inc. (NYSE:GS) became the latest bank to handily beat Wall Street analysts’ estimates. Also, the heavy focus on earnings could ease a little this morning as many investors get on the Fed watch. Fed Chair Jerome Powell will be testifying to Congress, so that’s probably going to be on the financial airwaves for a while. It would be surprising if Powell says anything all that new, judging from past Fed chair appearances on Capitol Hill, but people will likely have their ears perked just in case.

After failing to wear its rally cap Friday in the wake of the first three big banks reporting earnings, the financial sector appeared to experience a delayed reaction Monday. Some of the best-performers on the S&P 500 (SPX) included JP Morgan Chase & Co. (NYSE:JPM), Bank of America Corp. (NYSE:BAC), and Citigroup Inc. (NYSE:C). Even Wells Fargo & Co. (NYSE:WFC), which delivered what many analysts saw as disappointing earnings last week, found some traction. 

The strength in financials might have stemmed in part from BAC’s better than expected Q2 results early Monday. In addition, JPM got some of the love from investors that appeared to be absent Friday after it reported a stellar quarter. The announcement from Goldman Sachs that it’s chosen a new CEO seemed to help that stock. Fundamentals are starting to look pretty good across the financial industry, and the old market wisdom is that for a broader rally to stick, it helps to have financial participation.

Big banks also might continue to hog the headlines Tuesday and Wednesday as GS reported today and Morgan Stanley (MS) reports tomorrow. Both could face pressure to show strength in their trading divisions. From a headline perspective, results from GS looked strong. Earnings per share of $5.98 crushed the Street’s projections, and revenue of $9.4 billion was also well above what analysts had forecast. GS had been expected to report adjusted EPS of $4.67, compared to $3.95 last year, on revenue of $8.74 billion, according to third-party consensus analyst estimates. However, shares slipped in pre-market trading.

As financials advanced Monday, energy stocks took a dagger from a plunge in oil prices. U.S. crude sank to a finish just above $68 a barrel as the Trump administration seemed inclined to loosen import restrictions on Iranian oil, media reports said. While weaker oil put energy stocks on the defensive Monday, it’s arguably a bullish development for many companies that rely on oil (meaning most of the S&P 500). However, transport stocks, one sector that often benefits from cheaper energy, fell about 1 Monday. Gas prices came tumbling down as well, falling $0.10 a gallon (see figure 1 below).

June retail sales came in with a strong 0.5 percent advance, and looking deeper into the report Monday there were other things to like as well. Notably, the government upwardly revised May retail sales growth to 1.4 percent from the previous 0.9 percent, which was already high historically. The May number is now the highest monthly growth since last September, though that month might have been out of whack due to a major hurricane that struck the U.S. then. One caveat about June sales was that a lot of the rise reflected higher energy prices, which tend to often provide a brake on the economy rather than a boost. Still, car sales looked strong, and non-store retailers, which could include e-retail, rose 1.3 percent. Perhaps that’s a good sign for Q2 earnings from major web retailers as well as big box stores that have more and more of their sales growth online. 

Amid robust earnings from BAC and JPM, plus an uptick in the 10-year rate that helped give a lift to banks, some are asking what might happen to the rest of the economy if we were to get a serious bump in interest rates. Take mortgage rates, for example. According to Freddie Mac, the average rate on 30-year mortgages issued last month was 4.57 percent. A year ago, that rate was 3.9 percent. That’s 17 percent higher. Adjustable-rate mortgages (ARMs), which are more closely tied to short-term rates, have risen even more over the last year, as the Fed continued its cycle of rate hikes. Might this pinch be felt elsewhere in the economy? If so, where? Retail sales (see above) have still been robust. Ditto for consumer confidence—though it dipped slightly in June, it’s coming from multi-year highs. We might get the next clue tomorrow, when fresh readings on housing starts and building permits are set to be released. Recall last month, housing starts blew away forecasts, coming in at 1.35 million.      

Last month, the market seemed burdened by many investors adopting what appeared to be a “risk-off” position, meaning a focus on sectors traditionally less prone to moving lower amid volatile geopolitics. Sectors like telecom and utilities gained, while financials and some of the other so-called “cyclical” sectors sagged. It’s still early in earnings season, but there’s a chance this has turned around a bit and investors seem willing to embrace more risk. Looking at performance in the S&P 500 sectors last week, info tech, consumer discretionary, and industrials were among the leaders. Financials continued to move up on Monday. All of these are traditionally sectors investors dive into when they’re more optimistic about the economy and less fearful of geopolitics. Granted, geopolitics have a way of jumping back into the picture these days, and the tariff situation with China is far from solved.