The U.S. equity markets were mixed, as continued pressure on Treasury yields and a disappointing report from Goldman Sachs pressured financials, but a blowout quarter from Netflix gave consumer discretionary stocks a boost. Meanwhile, political uncertainty was elevated as the Senate's healthcare bill failed again and a read on home-builder sentiment disappointed. Crude oil, gold and the US dollar were higher.
The Dow Jones Industrial Average (DJIA) fell 55 points (0.3%) to 21,575, the S&P 500 Index gained 2 points (0.1%) to 2,461, and the NASDAQ Composite increased 30 points (0.5%) to 6,344. In light to moderate volume, 694 million shares were traded on the NYSE and 1.7 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.38 to $46.40 per barrel and wholesale gasoline was $0.02 higher at $1.58 per gallon. Elsewhere, the Bloomberg gold spot price gained $7.80 to $1,241.91 per ounce, and the dollar index, a comparison of the U.S. dollar to six major world currencies, was 0.1% higher at 94.67.
Dow member Goldman Sachs Group Inc. (NYSE:GS $223) reported Q2 earnings-per-share (EPS) of $3.95, compared to the FactSet estimate of $3.38, as revenues dipped 1.0% year-over-year (y/y) to $7.9 billion, versus the projected $7.6 billion. GS topped estimates for most of its business units, but its fixed income currency and commodity unit's activity noticeably missed expectations. The company said a mixed operating environment persisted into Q2 as conditions continued to support underwriting and M&A, while also constraining certain market-making activity. Shares were lower.
Bank of America Corp. (NYSE:BAC $24) posted Q2 profits of $0.46, above the projected $0.43, as revenues increased 7.0% y/y to $22.8 billion, versus the expected $21.9 billion. Trading revenues were slightly ahead of forecasts, while its net interest income and margin came in a bit shy of estimates. BAC lost ground.
Dow component Johnson & Johnson (NYSE:JNJ $134) announced Q2 EPS of $1.40, or $1.83 ex-items, compared to projections of $1.79, with revenues rising 1.9% y/y to $18.8 billion, just below the $19.0 billion estimates. JNJ raised its full-year guidance, and shares were higher.
Dow member UnitedHealth Group Inc. (NYSE:UNH $185) reported Q2 earnings of $2.32 per share, or $2.46 ex-items, versus the projected $2.38, as revenues grew 8.0% y/y to $50.1 billion, compared to the expected $50.0 billion. UNH raised its full-year EPS outlook, and shares were higher.
Netflix Inc. (NASDAQ:NFLX $184) posted Q2 EPS of $0.15, one penny shy of estimates, as revenues increased 32.3% y/y to $2.8 billion, roughly in line with expectations. The company's net subscriber additions easily topped expectations. NFLX issued Q3 guidance that was well above estimates. Shares of NFLX rallied.
Homebuilder sentiment falls
The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month dropped to 64 from June's downwardly revised level of 66, and below the Bloomberg forecast calling for a 67 reading. This was the lowest since November but remains well above the 50 mark, the point of separation for good versus poor conditions. The NAHB said its members are telling it they are growing increasingly concerned over rising material prices, particularly lumber.
Tomorrow, housing construction activity will be in focus, with the release of June housing starts and building permits. Starts are projected to snap a three-month streak of losses, rising 6.2% month-over-month (m/m) to an annual rate of 1,160,000 units, while permits are expected to increase 2.8% to an annual rate of 1,201,000 units, after posting back-to-back monthly declines. Weekly MBA Mortgage Applications will also be reported.
The Import Price Index decreased 0.2% month-over-month (m/m) for June, matching the Bloomberg projection, and compared to May's upwardly revised 0.1% decrease. Compared to last year, prices were up by 1.5%, above forecasts calling for a 1.3% rise and following May's upwardly revised 2.3% increase.
Treasuries were higher, as the yield on the 2-Year note dipped 1 basis point (bp) to 1.35%, while the yields on the 10-Year note and the 30-Year bond dropped 5 bps to 2.27% and 2.86%, respectively.
Bond yields and the U.S. dollar have slipped as of late following brief rebounds, pressured by continued subdued inflation data, exacerbated by Fed Chair Janet Yellen's dovish semi-annual monetary policy testimony last week.
The political front remains in focus as the highly scrutinized revised Senate healthcare bill appears to be getting scrapped again, and focus appears to be shifting to repealing Obamacare instead of replacing it.
Europe sees pressure on political uncertainty and data, Asia mixed
European equities finished broadly lower, with another setback for the U.S. healthcare bill and the continued U.K. Brexit negotiations adding to political uncertainty. Technology issues led to the downside as the markets digested ramped up earnings season on both sides of the pond. In economic news, German investor confidence declined for a second-straight month, while U.K. inflation data came in mostly below forecasts.
The British pound saw some pressure versus the U.S. dollar on the data. The euro rose versus the greenback, ahead of this week's monetary policy decision by the European Central Bank, while bond yields extended a recent slide to weigh on financials, along with a negative reaction to earnings reports from the sector out of the U.S. Basic materials came under pressure.
Stocks in Asia finished mixed to mostly lower, following flared-up U.S. political uncertainty, while the yen gained ground to pressure Japanese equities after returning to action following yesterday's holiday break. The markets are also eyeing this week's monetary policy decision by the Bank of Japan. Australian securities fell sharply amid a broad-based decline among sectors, while those traded in South Korea finished flat, holding at a record high. Stocks in India dropped, retreating from a record high.
Tomorrow's international economic calendar will be very light, with the lone report of note being PPI from South Korea.