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Stock Market News for Jul 18, 2023

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U.S. stock markets closed higher on Monday as market participants continue to keenly watch the second-quarter 2023 earnings results. Investors are also waiting the July FOMC meeting of the Fed scheduled to take place next week. All the three major stock indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.2% to close at 34,585.35, marking its highest closing in 2023. Notably, 17 components of the 30-stock index ended in positive territory, while 13 in negative zone. The blue-chip index posted sixth consecutive winning days.

The tech-heavy Nasdaq Composite finished at 14,244.95, advancing 0.9% or 131.25 points due to strong performance of large-cap technology stocks. However, in intraday trading, the tech-laden index recorded its highest level since April 2022.  

The major gainer of the tech-laden index was Enphase Energy Inc. (ENPH - Free Report) . Its stock price climbed 6.6%. Enphase Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 gained 0.4% to end at 4,522.79. In intraday trading, the broad-market index recorded its highest level since April 2022. Six out of 11 broad sectors of the benchmark ended in negative zone while 5 finished in positive territory.

The Technology Select Sector SPDR (XLE) and the Financials Select Sector SPDR (XLF) rose 1.3% and 1%, respectively. On the other hand, Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) fell 1.2% and 0.9%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was up 1.1% to 13.48. A total of 9.54 billion shares were traded on Monday, lower than the last 20-session average of 10.92 billion. advancers outnumbered decliners on the NYSE by a 1.42-to-1 ratio. On Nasdaq, a 1.75-to-1 ratio favored advancing issues.

Q2 Earnings Season Gathers Pace

The second-quarter 2023 earnings season officially started last week with the financial results of major banks. The motion is slowly gathering pace as around 150 companies are slated to report earnings results this week. This reporting cycle is beginning with tepid expectations as the market’s benchmark — the S&P 500 Index — is likely to witness the third consecutive quarter of earnings decline.

However, the initial results of this earnings season are fairly good. As of Jul 14, 30 S&P 500 companies have reported earnings results. Total earnings of these companies are up 5.9% year-over-year on 8.5% higher revenues. Of these 30 companies, 83.35 surpassed EPS estimates while 66.7% outpaced revenue estimates.

At present, our estimate has shown that total earnings of the S&P 500 Index likely to drop 9.8% year-over-year on 0.4% lower revenues. The second-quarter earnings decline would follow the 3.4% decline in the first quarter and a 5.4% drop in fourth-quarter 2022.

Fed’s July FOMC in Focus

The Fed paused the current interest rate hike cycle in its June FOMC meeting after 10 consecutive increases. However, the Fed Chairman Jerome Powell warned that more rate hikes are expected in this year. The “dot plot” of June FOMC showed that majority of Fed officials expected two more rate hike of 25 basis points each this year.

At present, the Fed fund rate is 5-5.25%. Currently, the CME FedWatch has assigned 97% probability that the Fed will raise the benchmark interest rate by 25 basis points in July FOMC while a mere 3% respondents are expecting the central bank to maintain status quo. A section of economists and financial experts remained concerned that higher interest rate may lead to a near-term recession.


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