U.S. Stocks Eke Out Narrow Gains as Investors Brace for Downbeat Earnings Season

The Dow and broader U.S. stock market struggled for direction Monday before finishing with minor gains, as investors turned their attention to second-quarter earnings season. If recent forecasts are any indication, Q2 2019 results will be mediocre.

Dow, S&P 500, Nasdaq Hit All Time Highs

All of Wall Street’s major indexes closed out the Monday session at new all-time highs. After trading within a narrow range for most of the day, the Dow Jones Industrial Average closed up 27.13 points, or 0.1%, at 27,359.16.

Dow Jones Industrial Average finishes lackluster session at new highs. | Source: Stockcharts.com

The broad S&P 500 Index of large-cap stocks edged up half a point by the close to finish at 3,014.30. Gains were reported across most sectors, led by consumer discretionary and utilities.

Meanwhile, the technology-focused Nasdaq Composite Index rose 0.2% to 8,258.19.

U.S. stocks are coming off a week of major milestones, with the Dow crossing 27,000 and the S&P 500 hitting 3,000 for the very first time.

Earnings Season Underway

Second-quarter earnings season began in earnest on Monday after Citigroup Inc. (NYSE:C) reported better than expected profits. The major bank reported $4.8 billion in second-quarter profit, up 7% over year-ago levels. Revenues were flat in year-over-year terms.

A slew of big banks are scheduled to report their results this week, including JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC).

Analysts at FactSet are forecasting a year-over-year profit decline of 3% for S&P 500 companies. If the forecast holds, it would mark the first back-to-back quarters of declining profitability since the first half of 2016. The financial research firm said the forecast could change if early results prove stronger than expected.

China GDP Slowdown

The Chinese economy’s long unwind from global growth stalwart continued last quarter, as output fell to its lowest level in nearly three decades.

China’s gross domestic product (GDP) – the broader measure of economic output – expanded just 6.2% annually in the second quarter, matching estimates for the slowest rate of growth in 27 years, the National Bureau of Statistics reported Monday. On a quarterly basis, GDP grew slightly ahead of projections at 1.6%.

The world’s second-largest economy is in the midst of a multi-year slowdown as it shifts focus from exports and manufacturing to consumption and services. But the transition has been far from smooth since President Trump took office.

President Trump is taking China to task over what he considers to be unfair trade practices. Both sides have been locked in a bitter trade dispute for nearly a year, and have only recently agreed to return to the negotiating table. Uncertainty caused by the U.S.-China trade spat has been a major factor in the sharp downward revisions to global GDP by the likes of the World Bank and International Monetary Fund.

Featured image courtesy of Shutterstock. Chart via Stockcharts.com. 

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi