Bank Earnings Calls Fuel Risk-on Afternoon

Earnings force rates, equities higher. Swap rates and Treasury yields rose significantly from their lows today after positive earnings calls fueled a risk-on mood. Bank of America and Morgan Stanley led the way, with the former’s fixed-income and equity businesses delivering surprise gains and the latter pointing to an improved outlook. The 2-year UST yield closed at 4.77%, 10bps higher than the intraday low. Equities climbed on the sentiment, the DJIA rising 1.06% and the S&P 500 rising 0.71%.

Retail sales summary. Retail sales were mixed today, with June’s headline and ex-autos figures coming in below forecasts, but May’s levels being revised upwards. Retail sales rose 0.2% MoM in June, a decline from May’s 0.5% and the lowest level since March. The report was positive overall, marking the third straight month of positive growth in the retail sector amid fears of an imminent recession.

Day ahead. Mortgage rate and application figures will lead the session at 7 AM. Building permits and housing start data will follow shortly thereafter. Building permits are expected to stay near flat at 1500k, while housing starts are expected to decline from 1631k to 1480k.