Stocks Edge Still Higher on Citigroup's Profits
NEW YORK ( TheStreet) -- U.S. stocks gained for an eighth day on Monday as Citigroup's better-than-expected second-quarter profits offset a slowdown in U.S. retail spending and broader growth in China, the world's second-largest economy.
U.S. retail sales increased by a less-than-expected 0.4% in June, threatening to put further pressure on the U.S.'s second quarter gross domestic product number, the Census Bureau reported Monday. Economists, on average, expected an increase of 0.8%, according to a Thomson Reuters poll of economists.
"The number one takeaway from today's report is that the consumer was a bit weaker than expected in the second quarter," Dan Greenhaus, chief global strategist at BTIG in New York, wrote in a client note.
Citi's improved performance comes as consumer discretionary stocks, health care and financials lead the S&P 500 this year on gains of 25%, 24% and 23%, respectively, compared to the the broader market that has added 18%, its best start to a year since 1998.
"While we continue to believe stocks are likely to experience a rocky second half given the likelihood for Fed policy reversal and the unlikelihood S&P 500 companies to achieve earnings expectations, stocks so far have denied our expectations, surging to new highs again last week," Gina Martin Adams, a New York-based senior analyst at Wells Fargo Securities, said in a Monday note. "While our faith in the durability of the broader market advance is limited, our faith in domestic and defensive sector leadership remains unchanged."
In China, the National Bureau of Statistics said gross domestic product rose 7.5% in the second quarter from a year ago, slowing from a growth of 7.7% in the first quarter.
This week marks the beginning of second-quarter earnings announcements with some 80 companies set to release their results. The majority of these announcements will come from 22 financial companies, 13 industrial companies and 12 technology companies.
Overall, second quarter earnings on average are expected to grow 2.4% over the same time last year, according to a Thomson Reuters survey of analysts. Of the 26 companies in the S&P 500 that have reported second-quarter earnings so far, 65% have reported earnings above analyst expectations. This is higher than the long-term average of 63% and below the average over the past four quarters of 67%.