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  • Writer's pictureKevin Hurley

Marketbites: Earnings Season Off to a Strong Start


Portfolio Manager Commentary:

The Dow Jones Average was higher Tuesday as traders digested better-than-expected corporate earnings. The Dow notched its seventh straight day of gains and its longest winning streak since March 2021. All three major averages had their highest closes since April 2022.

Bank of America reported better-than-expected earnings for the second quarter, thanks to higher interest rates. Bank of New York Mellon’s earnings also exceeded expectations. Shares of both banks gained more than 4%. Morgan Stanley stock added 6.4% after a beat on both revenue and adjusted earnings per share, driven by record revenue in its wealth management segment. PNC Financial advanced 2.5% on the back of mixed second-quarter numbers. J.B. Hunt is slated to report after the bell.

Overall, the earnings season is off to a strong start. Of the S&P 500 that have reported, 84% exceeded profit estimates, according to FactSet. Meanwhile, investors are seemingly shaking off soft data from the Commerce Department out Tuesday. Advance retail sales ticked up 0.2% month-over-month in June, while economists polled by Dow Jones forecasted a 0.5% increase.

“Americans have gotten relief at the gas pump, but also don’t have an excessive demand for consumer goods,” said David Russell, vice president of market intelligence at TradeStation. “This is modestly positive news for investors worried about the Fed needing to hike after July. Goldilocks marches on.”

Chart of the Day:

Despite favorable oil prices, the shale industry is experiencing a significant decline in rig activity, reminiscent of the peak of the Covid-19 pandemic. Private companies, which had aggressively increased rig deployment as the pandemic waned, have exhausted many of their high-quality remaining wells, necessitating a slowdown in drilling operations. In contrast, larger public companies are maintaining their drilling programs as they possess substantial untapped premium wells in their inventory. The total count of active oil and gas rigs has decreased from approximately 800 at the beginning of the year to around 670, and private drillers are responsible for about 70% of this decline, as noted by TD Cowen investment bank analyst David Deckelbaum.

Source: WSJ

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