U.S. stocks rose as retail sales advanced before Federal Reserve Chair Janet Yellen’s semi-annual testimony to Congress. The pound gained, oil slid and corn declined to near a four-year low.
The Standard & Poor’s 500 Index climbed 0.2 percent at 9:49 a.m. in New York. JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc. (NYSE:GS) rose more than 1.7 percent after the banks reported better-than-estimated earnings. U.S. crude fell below $100 a barrel for the first time since May. The yield on 10-year Treasury notes was little changed near the lowest in six weeks. The pound gained against all of its 16 major counterparts and Israel’s currency advanced to the strongest since 2011 versus the dollar. Corn (CBOT:ZCU14) fell 0.8 percent.
Retail sales showed a broad-based increase in June, which probably helped the U.S. economy rebound in the second quarter. Yellen speaks today and tomorrow, with traders betting the Fed will raise interest rates next year after employment gains in June exceeded economists’ forecasts. JPMorgan Chase said second-quarter profit beat estimates and Goldman Sachs reported a surprise increase in earnings.
“The most important event for investors today is Yellen’s testimony,” said Christian Stocker, a strategist at UniCredit Bank AG in Munich. “Many members of the Fed committee are not as dovish as Yellen is. As she’s speaking on behalf of the Fed committee, she may sound a bit more hawkish than she usually does about the timing of interest-rate hikes. That could lead to some uncertainty in the market.”
Yellen delivers her semi-annual testimony to the Senate today and to the House Committee tomorrow. She said last month that the Fed will keep interest rates low for a considerable time after ending its asset-purchase program, even as it saw improvements in the economy and labor market.
U.S. retail sales rose 0.2 percent in June after a 0.5 percent advance in May that was larger than previously reported, Commerce Department figures showed today in Washington. The New York Fed’s Empire manufacturing report unexpectedly rose to 25.6 for this month from 19.28 last month.
The S&P 500 climbed 0.5 percent yesterday, the most since July 3, to rebound from its worst week since April. Profit at S&P 500 companies probably rose 4.5 percent in the three months through June while sales advanced 3.1 percent, analyst estimates compiled by Bloomberg show.
JPMorgan Chase climbed 3.3 percent and Goldman Sachs rose 1.7 percent to lead an index of banks to the biggest advance in the S&P 500. Both firms reported fixed-income revenue that topped estimates. Banks have seen profits hurt in recent quarters as the Fed slows its bond buying and fixed-income clients make fewer bets amid low volatility.
Wells Fargo & Co., the most valuable U.S. bank, posted second-quarter profit last week that rose 3.8 percent on lower credit costs, while Citigroup Inc. said yesterday that net income fell 96 percent as the company agreed to pay $7 billion to resolve a mortgage-related probe. Bank of America Corp., the second-biggest U.S. lender by assets, is scheduled to report results tomorrow.
Lorillard Inc. (NYSE:LO) dropped 7.3 percent after Reynolds American Inc. reached an agreement to buy its rival for $27.4 billion including debt. Reynolds lost 3.4 percent.
The Stoxx Europe 600 Index was little changed after yesterday rallying the most in a week. Software AG declined 17 percent after the German company lowered its operating-margin forecast, dragging technology companies down for the second- biggest decline among 19 industry groups. Draegerwerk AG slumped 18 percent after the German maker of medical equipment cut its projection for sales growth.