U.S Stocks Are Mostly Higher Due to Strong Earnings and Retail Spending

During Tuesday morning's trading session, U.S. stocks showed mostly positive momentum as investors reacted positively to a series of largely positive corporate earnings reports. However, they also evaluated retail sales data that revealed a more cautious consumer sentiment in June.

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Here is a breakdown of how stocks are performing:

• The S&P 500 is currently up 7 points, or 0.1%, reaching 4,530.
• The Dow Jones Industrial Average has gained 242 points, or 0.7%, reaching 34,827.
• The Nasdaq Composite has experienced a slight decline of 40 points, or 0.2%, settling at 14,204.

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On Monday, the Dow Jones Industrial Average rose by 76 points, or 0.22%, closing at 34,585. The S&P 500 increased by 17 points, or 0.39%, closing at 4,523, while the Nasdaq Composite gained 131 points, or 0.93%, reaching 14,245.

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Investors are currently focusing on assessing the state of the economy through the lens of corporate America as the second-quarter earnings season unfolds. Several large banks, including Bank of America, Morgan Stanley, and BNY Mellon, are reporting their earnings today. Interactive Brokers, Charles Schwab, and defense contractor Lockheed Martin have also released their results.

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Last Friday, JPMorgan Chase & Co., Wells Fargo, and Citigroup beat their earnings targets, boosting investor confidence. Market participants hope that the upcoming earnings figures and management forecasts will support the current market levels, which have reached their highest since April 2022. Year-to-date, the S&P 500 and Nasdaq Composite indices have risen by 17.8% and 36.1%, respectively.

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The recent decline in implied borrowing costs, with the 10-year Treasury yield dropping to 3.77% from over 4% just a week ago, has bolstered market sentiment. This decline is driven by hopes that easing inflationary pressures will enable the Federal Reserve to adopt a less aggressive stance toward interest rate hikes.

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The Federal Reserve's upcoming meeting, scheduled for next week, will be closely monitored as investors seek clues about future interest rate movements. While a 25-basis point increase in the Fed funds rate is widely expected, the main question revolves around what comes next.

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Some analysts emphasize that monetary policy remains the primary driver of market dynamics. Stephen Innes, Managing Partner at SPI Asset Management, suggests that interest rates will likely continue to be the most influential factor for risk markets, given the current conditions of nominal growth, easing inflation, and moderate earnings expectations.

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The health of the consumer remains an ongoing concern. June retail sales figures showed a modest increase below expectations, indicating growing consumer caution amid the Fed's rate hike campaign and uncertainty about the future direction of the economy. Retail sales rose by 0.2% in June, falling short of the anticipated 0.5% increase. Excluding automobiles and gasoline, sales saw a 0.3% increase during the month.

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Robert Frick, Corporate Economist at Navy Federal Credit Union, commented on the retail sales data, stating that while positive, the numbers were weaker than expected and indicated a rising sense of consumer caution. Frick noted that although Americans have the financial means to spend, with more jobs, higher wages, and lower inflation, they are choosing to be prudent, possibly due to concerns about a potential increase in unemployment later this year.

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Additional economic updates released on Tuesday included June industrial production and capacity figures. Industrial output declined by 0.5% in June, following a revised 0.5% decrease in the previous month. The decline was below expectations of a flat reading. One economist described the manufacturing sector as being in a "sorry state." Meanwhile, business inventories increased by 0.2% in May.

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