Earnings Continue to Boost Equities, Risk Assets

 

Equities Rise on Earnings

A strong corporate earnings season continues to boost the stock market, as we remain on pace this quarter for the highest number of firms in history reporting better than expected results.  All three major indices posted gains on the day, with the DJIA leading the way (+0.50%), and the NASDAQ and S&P 500 recording more modest gains of +0.31% and +0.28%, respectively, as the S&P traded within 1% of its all-time high.   The stock price of Tesla surged this afternoon (+11%) following a controversial tweet from CEO Elon Musk, where he announced the possibility of taking the company private at $420/share.  Signaling possible equity market complacency, the CBOE Volatility Index (VIX), otherwise viewed as a market fear index, fell near its lowest levels of the year, closing down 3.02% on the day at 10.93.

 

 

US Treasurys and swaps sold off on the day, with yields/rates up 1-4 bps across the curve.  The 10-year Treasury note closed at a yield of 2.97% (+3bps), yet again approaching the psychologically-significant 3.00% level, which in the recent past has been a strong resistance level.  WTI crude futures extended yesterday’s rally to its highest closing level in more than 10 days, settling 0.8% higher to $69.55/barrel.  This followed reinstatement of sanctions against Iran today and further signs of a drop in US crude stockpiles.  In foreign exchange markets, the US dollar (USD) fell 0.4% against the euro (EUR) and lost 0.1% against the British pound (GBP).  In emerging market currencies, the Turkish lira briefly plummeted to a record low, impacted by the Trump administration’s announcement that it was reviewing the duty-free access exporters of Turkish goods to the US currently enjoy.  In addition, access to the dollar denominated debt market has all but dried up for the Turkish government and corporate sector, while the US continues to threaten increasing sanctions against Turkey.

 

 

Plenty of Job Openings Out There

Helping to contribute to the broad sense of optimism surrounding the economy was today’s JOLTS report issued by the Labor Department, which underscored the existing strength in the jobs market.  Job openings during June remained near unchanged at a seasonally adjusted 6.66 million – within 100k of the all-time high.  The number of hirings totaled 5.651 million, pushing the gap between openings and hires to more than one million.  In short, companies are expanding and hiring (or at least trying to), however it seems that the requirements of the jobs available are not met being met by many in the job-seeking pool.  Also detailed in the report, the quits rate, an often-referenced measure of confidence in the jobs market, held at 2.3% for a fourth straight month as 3.4 million Americans quit their jobs in June.