Financial Stocks Surge Higher, Dividend Payers Dip, Groupon Looks For A New Deal
U.S. stocks climbed with other markets on Monday as worries about trade tensions between the United States and the rest of the world took a back seat.
The world’s two largest economies took their biggest steps yet on Friday in a brewing global trade war after the United States and China imposed dueling tariffs on each other’s goods. But a better-than-forecast U.S. jobs report on Friday and the expectation for strong earnings reports from nearly every swath of corporate America in the upcoming weeks have nevertheless helped support stocks.
KEEPING SCORE: The S&P 500 was up 24 points, or 0.9 percent, at 2,784. It follows Friday’s 0.8 percent gain after the government reported that U.S. job growth remains strong despite all the concerns about global trade.
The Dow Jones industrial average rose 320, or 1.3 percent, to 24,776, and the Nasdaq composite rose 67, or 0.9 percent, to 7,756.
EARNINGS SEASON: Companies are lining up to tell investors how much profit they made during the spring, and expectations are high for another gangbusters quarter of growth.
Citigroup, JPMorgan Chase and Wells Fargo are among this week’s headliners, and all are reporting on Friday. Across the S&P 500, analysts are calling for 19 percent growth in earnings per share from a year earlier, according to S&P Global Market Intelligence. It’s an unusually strong burst of growth for companies this many years into an economic expansion. Lower tax rates and stronger revenues are helping to drive the gains.
The growth may be peaking, however. Perhaps more important than the numbers for last quarter will be what CEOs and companies say in conference calls about how much the trade tensions will hurt their profits later in the year.
“It’s hard to not see it being an issue that hurts margins,” said Matthew Miskin, market strategist with John Hancock Investments.
TRADE WAR: There were few developments over the weekend after Washington put a 25 percent tax on $34 billion worth of Chinese imports Friday and Beijing retaliated with taxes on U.S. soybeans, pork, electric cars and other products. The full impact of the measures may not be felt for some time, and there was little immediate reaction from investors who had already sold stocks on the assumption that a full-blown, harmful trade war was a certainty.
“There are certain pockets of the market that were pricing in a worst-case scenario,” Miskin said. “The market in the second quarter tried to price in this whole thing, and it was probably a little too fast for that.”
YIELDS: Yields on Treasurys rose as prices for bonds fell. The yield on the 10-year Treasury note climbed to 2.85 percent from 2.82 percent late Friday. The two-year yield rose to 2.56 percent from 2.54 percent, and the 30-year yield pushed up to 2.96 percent from 2.93 percent.
FINANCIAL FLING: Higher interest rates can translate into bigger profits for banks by enabling them to charge higher rates for mortgages and other loans.
Financial stocks were the market’s leader, and those in the S&P 500 jumped 2.4 percent for the biggest gain among the 11 sectors that make up the index.
DIVIDENDS DULLED: On the flip side, higher interest rates can lure buyers away from high-dividend stocks because they become more interested in bonds.
Telecoms and real-estate investment trusts both lost ground, while utilities were the worst-performing area of the S&P 500, dropping 2.9 percent.
BEAUTIFUL: Helen of Troy’s shares surged 13.6 percent to $115.80 after the consumer-products company reported stronger revenue for the spring, with particularly strong growth in online sales.
Like much of corporate America, Helen of Troy has been using cash to buy back its own stock, which means profits are getting allocated over fewer shares. The company behind the Oxo and Braun brands said that it repurchased enough during the last quarter to raise its forecast for earnings per share for this fiscal year.
DEALING: Groupon jumped 8 percent to $4.74 following a report from Recode that the daily-deal company is aggressively looking to be acquired by another company.
Its stock has lost more than 80 percent since peaking in late 2011.
MARKETS ABROAD: France’s CAC 40 rose 0.4 percent, Germany’s DAX added 0.4 percent and the FTSE 100 climbed 0.9 percent.
Japan’s Nikkei 225 jumped 1.2 percent, the Hang Seng in Hong Kong climbed 1.3 percent and the Kospi in South Korea added 0.6 percent.
Stocks from emerging markets, which have been on a wild ride up and down this year, jumped 1.5 percent.
CURRENCIES: The dollar edged up to 110.82 Japanese yen from 110.45 yen late Friday. The euro inched up to $1.1749 from $1.1745, and the British pound slipped to $1.3253 from $1.3266.
COMMODITIES: Benchmark U.S. crude rose 5 cents to $73.85 per barrel. Brent crude, the international standard, rose 25 cents to $74.04 a barrel.
In other energy trading, heating oil rose 3 cents to $2.20 a gallon and wholesale gasoline rose 4 cents to $2.15 a gallon. Natural gas fell 3 cents to $2.83 per 1,000 cubic feet.
Gold rose $3.80 to settle at $1,259.60, silver added 7 cents to $16.14 per ounce and copper gained 3 cents to $2.85 per pound.
© The Associated Press. All rights reserved.