Bank Stocks Send S&P 500 To New Record High

Monday brought big gains for bank stocks, despite a disappointing report from the National Association of Realtors, indicating that existing home sales declined 1.2 percent during June. Although homebuilders’ stocks got pinched by the news (XHB), the KBW Bank Index (BKX) jumped 0.98 percent to 66.70, hitting its highest level since October of 2008, as a number of banks reported better-than-expected quarterly earnings.

Over 150 companies from the S&P 500 are reporting their quarterly earnings during this week. McDonald’s (MCD) got the day off to a bad start, after falling short of revenue estimates.

The Dow Jones Industrial Average (DIA) picked up a point to finish Monday’s trading session at 15,545 for a 0.01 percent advance. The S&P 500 (SPY) rose 0.20 percent to a new record-high close of 1,695.53.

The Nasdaq 100 (QQQ) climbed 0.34 percent to finish at 3,055. The Russell 2000 (IWM) advanced 0.28 percent to end the day at a new record-high close of 1,053.41.

In other major markets, oil (USO) sank 1.38 percent to close at $37.92.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil advanced by 8 cents (0.07 percent) to $108.15/bbl. (BNO).

August Gold Futures advanced by $41.70 (3.23 percent) to $1,334.60 per ounce (GLD).

Transports stalled out on Monday, with the Dow Jones Transportation Average (IYT) declining 0.08 percent.

In Japan, stocks made a modest advance after Prime Minister Shinzo Abe’s coalition won control of the nation’s parliament in Sunday’s election. A strengthening yen restrained the stock market, which was in the red for three hours as the yen surged to 99.69 per dollar during Monday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average advanced 0.47 percent to 14,658 (EWJ).

Stocks made gains in China after the nation’s central bank loosened interest rate regulations, raising hopes that small businesses would more easily obtaining financing. The Shanghai Composite Index advanced 0.61 percent to close at 2,004 (FXI). Hong Kong’s Hang Seng Index rose 0.25 percent to finish the session at 21,416 (EWH).

European stocks took a rollercoaster ride on Monday as enthusiasm following positive earnings reports from a number of companies, including UBS and Julius Baer Gruppe AG, was offset by Oppenheim’s downgrade of Nokia (NOK) to “underperform”. Concern resulting from hints by Glaxo SmithKline (GSK) representatives that some of its executives may have some exposure in the company’s Chinese payola scandal also weighed heavily on stock market enthusiasm (VGK).

The Euro STOXX 50 Index finished Monday’s session with a 0.34 percent advance to 2,725 – remaining above its 50-day moving average of 2,698. Its Relative Strength Index is 58.93 (FEZ).

Technical indicators reveal that the S&P 500 climbed further above its 50-day moving average of 1,640 after finishing Monday’s session with a 0.20 percent advance to its latest record-high close of 1,695.53. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index rose from 68.24 to 69.12. Both the MACD and the signal line continue to rise above the zero line, suggesting a continued advance.

For Monday, most sectors were in positive territory, except for the utilities, consumer discretionary and consumer staples sectors. The financial sector led the group, with a gain of 0.68 percent.

Consumer Discretionary (XLY): -0.07%

Technology: (XLK): +0.30%

Industrials (XLI): +0.07%

Materials: (XLB): +0.10%

Energy (XLE): -0.32%

Financials: (XLF): +0.68%

Utilities (XLU): -0.10%

Health Care: (XLV): +0.49%

Consumer Staples (XLP): -0.22%

Bottom line: Although a big earnings week began with disappointing news from McDonalds, the S&P 500 and Russell 2000 indices hit new record-high closing levels as the financial sector took the lead, with a large number of banks reporting better-than-expected earnings.

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