US Equities Rose on Housing, Strong Bank Earnings in Mid-July



US equities rose

The US market (SPY) rose by 2.41% during the week ended July 17, 2015. The rise was mainly due to an improvement in the US housing industry, a fall in jobless claims, and a rise in inflation.

The US economy’s fundamentals improved. Housing starts rose by 9.8% in June to a seasonally adjusted annualized pace of 1.17 million units. Permits for future home construction increased 7.4% to 1.34 million units, nearly an eight-year high. The housing sector is getting support from low mortgage rates and labor market strength. US consumer prices rose by 0.3% in June, the fifth straight month of increases, as gasoline and other goods increased in price.

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Earnings announcements

In 2Q15 earnings announcements, US banks posted strong results. The biggest US bank, JP Morgan (JPM), posted higher-than-expected profits on lower legal and restructuring costs. The bank beat analysts’ earnings estimates by streamlining its business and reducing legal and mortgage banking expenses. Bank of America (BAC) and Citi (C) reported their highest quarterly profits. Both banks far surpassed analysts’ expectations. Bank of America’s mortgage banking revenue almost doubled, and its net income more than doubled. Citigroup reported an 18% increase in net income, adjusting for legal costs and accounting items. However, Wells Fargo (WFC) and Goldman Sachs (GS) reported a decline in their profits for the second quarter.

On the technology front, Google (GOOG) reported better-than-expected profit for the first time in six quarters as search-engine ad revenue grew 11% and paid clicks increased 18%.

Stock market performance is a key driver of asset managers’ revenue. Performance flows directly to earnings and share prices. Major asset managers like BlackRock (BLK), State Street (STT), Franklin Resources (BEN), T. Rowe Price (TROW), Morgan Stanley (MS), and Berkshire Hathaway (BRK-B) are affected by US equities’ performance.

US equities rose along with European (EFA) and emerging market equities (EEM) during the week ended July 17, 2015.


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