Major exchange traded funds snapped a week-long losing streak
Friday as financials rallied. That followed banks' earnings
releases. It also came amid investors' speculation that China
will boost economic stimulus.
Financial Select Sector SPDR (
) outpaced all sectors in the S&P 500, surging 2.45%.
Financials are slated to post a 51% year-over-year earnings
increase in the second quarter -- the most of any S&P sector,
according to Thomson Reuters research. Earnings for energy and
utilities are expected to fall 16% -- the most among the S&P
JPMorgan Chase (
) surged nearly 6% in double average volume to 36.04. Q2 earnings
fell 5% year over year to $1.21 a share -- about $5 billion in
total. Revenue dropped 18% to $25.1 billion. CEO Jamie Dimon said
the country's largest bank will likely enjoy record earnings this
year despite a $4.4 billion trading loss in Q2. The bank said it
would restate its Q1 results and cut net income by $459 million,
owing to trading losses.
"We think the reductions in position size, combined with other
risk management measures detailed by management -- including more
stringent position limits, an updated mandate for the unit, and
new leadership -- will ensure that the largest losses stemming
from the 'London Whale' trades are behind the firm," Jim Sinegal,
an analyst at Morningstar wrote. Although he believes JPMorgan's
shares are undervalued, he noted: "Macroeconomic pressures,
including low interest rates and the European sovereign crisis,
are likely to weigh on performance for the foreseeable
Wells Fargo (
) climbed 3.4% after reporting that Q2 earnings rose 17% to 82
cents a share as sales rose 2% to $22.6 billion. The largest U.S.
mortgage lender reported increases in home loans and a strong
pipeline of applications thanks to low interest rates and
government programs driving demand for refinancing. Demand for
auto and commercial loans also increased.
Earnings results outshined a report that consumer sentiment
fell to its lowest level of the year. The Thomson
Reuters/University of Michigan consumer sentiment index dropped
to 72.0 so far this month from June's reading of 73.2. It missed
analysts' expectations of a 73.5 reading.
In afternoon trade, theSPDR S&P 500 (
) climbed 1.45%.SPDR Dow Jones Industrial Average (
) andPowerShares QQQ (QQQ), a basket of the largest 100
nonfinancial stocks on the Nasdaq, both popped 1.38%.
All three major ETFs appear to have found support at their
short-term, 50-day moving averages, a key level watched by market
"Equities have extended their sell-off to the point where we
should not be surprised to see a pause or a small bounce over the
next several sessions," Waverly Advisors wrote in their daily
client note. "We will continue to look for short-term bearish
plays in major indexes and suggest long only players carefully
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, added 1.33%.
IShares MSCI Emerging Markets Index (EEM) surged 1.72%.
Slower-than-expected growth in China's economy sparked
speculation of more economic stimulus.
China's real gross domestic product grew 7.6% year over year
in Q2, down from 8.1% in Q1 . Q2's pace was the slowest since
2009 and puts pressure on China's leaders to ensure a rebound in
the second half of the year. Annual GDP growth of 7.8% is seen
for the year. Industrial production grew 9.5% year over year in
June. That was down from 9.6% in May and missed expectations of
"There was no clear sign in the data releases in recent days
that the growth slowdown in China is over," Nick Chamie, an
analyst with RBC Dominion Securities, wrote. "Instead data
suggests that the economy continues to decelerate heading into
the third quarter in line with leading indicators. Further
growth-expectation downgrades should be expected, which will
continue to weigh on sentiment."
China's third quarter will likely be as weak as Q2. The
economy will likely recover in the fourth quarter, he noted.
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