- The Dow is on track for its longest streak of daily gains in over two years.
- US retail sales in June were lower than expected.
- Novartis rose by 4.6%, contributing to the upward movement of the STOXX 600 index.
US equities made gains on Tuesday, partly fueled by strong bank earnings. The Dow was on track for its longest streak of daily gains in over two years. Morgan Stanley shares surged by 6.45%, marking their largest one-day percentage increase since November 9, 2020. The bank exceeded expectations, with growth in its wealth management business offsetting lower trading revenue.
Bank of America also saw a gain of 4.42%, surpassing profit expectations due to higher earnings from customers’ loan payments. Moreover, investment banking and trading performed better than anticipated.
Tim Ghriskey, from Ingalls & Snyder in New York, commented, “This morning, all the banks reported, all beat earnings expectations, and all except PNC beat revenue expectations.”
Major US banks like JP Morgan had previously reported increased profits due to higher interest rates, indicating the economy’s resilience. The recent rally in equities has led to the S&P 500 and Nasdaq reaching their highest levels in 15 months. The rally was driven by data showing economic resilience, subdued inflation, and a strong labor market.
US retail sales (Source: US Department of Commerce)
Early data released on Tuesday revealed that retail sales in June were lower than expected, mainly due to a decline in building materials and service station receipts. However, consumer spending levels remained stable.
Additionally, production at domestic factories unexpectedly declined during the month but rebounded in the second quarter, particularly with accelerated motor vehicle output.
In European markets, equities rose as Swiss stocks strengthened following a forecast upgrade by drugmaker Novartis. However, the telecom sector index reached its lowest level in over six months due to a decline in Sweden’s Tele2 shares.
The pan-European STOXX 600 ended the day 0.6% higher after experiencing declines on Monday caused by weak economic data from China. The main index faced pressure earlier in the week due to concerns about China’s slowing economic growth. This followed significant gains the previous week driven by expectations of an imminent end to the US Federal Reserve’s hiking cycle.
Novartis rose by 4.6%, contributing to the upward movement of the STOXX 600 index. The increase came after Novartis raised its full-year earnings outlook and announced its intention to separate its generic medicines division, Sandoz, in early October.