Dow Enters Bull Market, Banks And Energy Lead; Microsoft Achieves Record High On AI Innovation: Tuesday's Market Movers

The risk appetite remains very strong among investors, with all major U.S. stock indices pushing higher on Tuesday, following robust earnings reports.

Banks have surprised analysts by beating estimates, driving the sector to recover all the ground lost after the Silicon Valley Bank collapse. The energy sector is also outperforming, fueled by strong gains in oil and natural gas prices.

The Dow Jones officially enters a bull market, having rallied over 20% from the October 2022 lows and returning to April 2022 levels.

Meanwhile, Microsoft Corp. MSFT surged 5%, setting new all-time highs, after announcing that it will charge $30 per user per month to access AI features in its widely used office software.

Traders are now eagerly awaiting Wednesday’s earnings reports from mega-cap companies such as Tesla Inc. TSLA, Netflix Inc. NFLX, International Business Machines Corp. IBM, and Goldman Sachs Inc. GS.

Cues From Tuesday's Trading:

The S&P 500 Index rose 0.5%, hitting levels last seen at the end of March 2022. The Nasdaq 100 Index gained 0.6%, reaching mid-January 2022 levels.

Blue chip stocks outperformed, with the Dow Jones roaring 1.1% to mid-April 2022 levels. Small caps in the Russell 2000 Index soared 1%.

US Indexes Performance On Tuesday

Analyst Color:

As tech stocks rebounded this year, an analyst at JPMorgan sounded a note of caution. “While it can be argued that recent developments like artificial intelligence (AI) will boost profit growth across many sectors over the long term, we are cautious to place too much weight on the view that tech earnings will prove countercyclical if the economy weakens in the coming quarters,” the firm said.

If the anticipated slowdown in economic activity materializes, a pullback in consumer and business spending still poses a risk to technology profits, JPMorgan said.

“With valuations in the sector once again back at elevated levels, there is little room for disappointment.”

Tuesday’s Trading In Major US Equity ETFs: In midday trading on Tuesday, the SPDR S&P 500 ETF Trust SPY was 0.5% higher to $453.03, the SPDR Dow Jones Industrial Average ETF DIA rose 0.9% to $349.12 and the Invesco QQQ Trust QQQ was 0.5% higher to $384, according to Benzinga Pro data.

Seven out of the 11 S&P sectors were in the green for the session. The outperformers were the Energy Select Sector SPDR Fund XLE, up 1.4%, and the Financial Select Sector SPDR Fund XLF, up 1.1%.

The laggards were the Real Estate Select Sector SPDR Fund XLRE and the Utilities Select Sector SPDR Fund XLU, both down 1.5%

Latest Economic Data:

Retail sales were up 0.2% month-on-month in June, following an upwardly revised 0.5% increase in May, but falling short of estimates of a 0.5% increase. Core retail sales, which exclude autos, gasoline, building materials, and food services, increased by 0.6%.

Industrial production fell 0.5% month-on-month in June, following an upwardly revised 0.5% decrease in the previous month and falling short of market expectations of a flat reading.

Manufacturing output fell 0.3% month-on-month in June, following a 0.2% drop in May and falling short of market forecasts of a flat reading.

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Stocks In Focus:

• Bank of America Corp. BAC, Morgan Stanley MS, PNC Financial, Inc. PNC, Charles Schwab Corp. SCHW, rose 4.7%, 6.2%, 2.7% and 12.8%, respectively, after delivering better-than-expected results in Q2.
• Pinterest, Inc. PINS rallied over 4% after Evercore ISI upgraded the stock from In-line to Outperform.
• Novartis AG NVS gained over 4% following its quarterly results announcement.
• Companies reporting results after the close include American Airlines, Inc. AAL and J.B. Hunt Transportation Services, Inc. JBHT.

Commodities, Bonds, Other Global Equity Markets:

Crude oil rose 1.9%, with a barrel of WTI-grade crude trading at $75.5. The United States Oil Fund ETF USO was 1.8% higher to $67.8.  

Treasury yields held steady, with the 10-year yield flat at 3.78% and the two-year yield flat at 4.75%. The iShares 20+ Year Treasury Bond ETF TLT was 0.4% higher for the day. 

The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.3% lower to 1.1210.

European equity indexes closed slightly in the green. The SPDR DJ Euro Stoxx 50 ETF  FEZ was flat. 

Gold rose 1.1% to $1,977/oz. The SPDR Gold Trust GLD was 1.1% higher to $183.6. Silver rose 0.9% to $25.03, with the iShares Silver Trust SLV up 0.8% to $23. Bitcoin BTC/USD was 1.3% lower to $29,746.

Staff writer Piero Cingari updated this report midday Tuesday. 

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