S&P 500 Hits Record as Banks Ride Rising Yields Higher Ahead of Earnings
Investing.com
Published Jul 09, 2021 04:01PM ET
By Yasin Ebrahim
Investing.com – The S&P 500, Dow and Nasdaq closed at record highs Friday, as a rebound in U.S. bond yields boosted banking stocks ahead of their quarterly results next week.
The S&P 500 rose 1.1% to a closing record high of 4,369.55. The Dow Jones Industrial Average gained 1.30%, or 447 points, and the Nasdaq was up 0.92%, with closing at record highs.
The U.S. bond yields found their footing as the 10-year yield recovered from a slip below 1.3% a day earlier. The move higher in yields sparked a bid in regional banking stocks, lifting the overall financial sector more than 2% higher.
State Street (NYSE:STT), Capital One Financial Corporation (NYSE:COF) and Synchrony Financial (NYSE:SYF) were among the biggest gains, up more than 4%.
Higher interest rates boost the return on interest that banks earn from their loan products, or net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to depositors.
The rally in banking stocks comes just days before major Wall Street banks kick off the quarterly earnings season in earnest on Tuesday.
JPMorgan Chase & Co (NYSE:JPM) and Goldman Sachs (NYSE:GS) are scheduled to report its fiscal second-quarter results on Tuesday. Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) will report results on Wednesday.
Wall Street will be watching for any guidance from banks on loan growth for the second half of the year following softness in the first half amid record consumer savings.
"Average loan growth to be under pressure in 2Q, but pay attention to end of-period (EOP) loan balances because if EOP is above the average it should foreshadow stronger loan growth in 2H21," Wedbush said in a note. "We expect positive commentary related to rebuilding loan pipelines to pre-pandemic levels and increased business activity supporting a pickup in loan growth in 2H21.
Tech stocks, meanwhile, also benefitted from strength in semiconductor stocks with Qualcomm (NASDAQ:QCOM) Taiwan Semiconductor Manufacturing (NYSE:TSM), and NXP Semiconductors NV (NASDAQ:NXPI) rising.
Big tech shrugged off further regulatory threats after President Joe Biden signed an order to increase competition in the biggest industries including tech.
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Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT, and Apple (NASDAQ:AAPL) were above the flatline. Amazon.com (NASDAQ:AMZN) was slightly lower.
In other news, General Motors (NYSE:GM) closed nearly 5% after Wedbush initiated coverage on the stock with a buy rating, and said the automaker’s progress with battery technology could help it rack up market share against its rivals.
Written By: Investing.com
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