Wall Street wrapped up a strong week with the S&P 500 index notching its 14th record close of the year at 6,388.64 points. Sentiment was boosted by positive trade developments and solid quarterly reports.
Trump announced a “massive deal” with Japan on Tuesday. As per the agreement, Japan has agreed to invest $550B in the U.S., while goods imported from Japan will be subject to a 15% tariff rate. Trump also hinted at further progress on trade with China, saying he might visit the Asian nation in the “not too distant” future to meet President Xi Jinping. Finally, Trump said he sees a 50-50 chance, of the U.S. and the European Union reaching a trade agreement.
The second quarter earnings season that began last week with solid results from the major banks and airlines was mixed this week, with Tesla shares sliding after the firm reported its worst quarterly revenue decline since 2012. But, Google impressed investors by easily beating expectations and sharply increasing its spending forecast.
For the week, the S&P climbed 1.5%, while the Nasdaq gained 1.0%. The Dow added 1.3%.
Future Wealth’s View
While it is still early in reporting season, with just 66 of the S&P 500 companies having reported thus far, it is important to note that 77% of the companies that reported, have beaten estimates and just 14% have missed estimates, with the rest coming inline with estimates. Commentary by CEOs in their earnings calls was decidedly positive.
Jane Fraser, CEO of Citigroup, stated on the earnings call – “The strength of the US economy, driven by the American entrepreneur and a healthy consumer, has certainly been exceeding expectations of late.” The sentiment was echoed by Wells Fargo CEO – Charles Scharf, when he said “Consumers and businesses remain strong, as unemployment remains low, and inflation remains in check.” Scott Kirby, CEO of United Airlines, commented that “Higher level of certainty has translated into a meaningful inflection point in demand.”
Despite the trade overhang, uncertainty appears to be fading. The economy remains resilient, and the consumer continues to be healthy and stable indicating to us that the stock market could continue to move higher from current levels.