Market Snapshot: U.S. stocks extend uptrend as banks pare early post-earnings declines

U.S. stocks advanced Friday, with key indexes gaining strength, as investors digested the first major reads on the second-quarter earnings season, which showed mixed results out of major banks.

Stocks are on track to extend a recent uptrend and are also set for strong weekly gains. Investors are looking to the earnings season, which will pick up steam over the coming weeks, to provide clarity on whether corporate fundamentals are strong enough to offset the uncertainty surrounding trade policy and other potential headwinds.

What are markets doing?

The Dow Jones Industrial Average DJIA, +0.38%  rose 96 points, or 0.4%, to 25,021. The S&P 500 index SPX, +0.19%  gained 5 points, or 0.2%, to 2,804. The Nasdaq Composite Index COMP, +0.18% added 16 points to 7,842, a rise of about 0.2%.

All three fluctuated between slight gains and losses in the morning, though the Nasdaq hit a record for a second straight session. Should the trio close higher, that would make for their sixth positive trading day of the past seven. Thursday’s rally was particularly robust, with technology stocks leading the day’s advance and contributing to the Nasdaq’s first record close since June 20.

Don’t miss: Stock gains in 2018 aren’t just a tech story, but they’re mostly a tech story

For the week, the Dow is up 2.3%, the S&P is up 1.6%, and the Nasdaq is on track for a 2% gain. This is set to be the second straight weekly advance for all three, as well as the Dow’s best week since early June.

What is driving the market?

While trade will likely remain a primary focus over the coming sessions, investors diverted their attention to the second-quarter earnings season. Though it is too soon to tell how the broad economy did over the quarter, the early reads were somewhat mixed.

JPMorgan Chase & Co. JPM, +0.32%  reported earnings and revenue that were better than had been forecast. However, the company’s consumer and community banking division was a weak spot, hurt by a decline in home lending. Shares rose 0.9%, erasing an early decline and supporting the Dow.

Separately, Citigroup Inc. C, -1.68%  reported earnings that came in ahead of expectations, although revenue was slightly below forecasts. Shares dropped 2.4%.

Wells Fargo & Co. WFC, -1.55%  posted earnings that fell from the prior year and came in below expectations. Revenue was also below forecasts, sending shares down 1.6%.

The Financial Select Sector SPDR Fund XLF, -0.33% a popular exchange-traded fund that tracks the sector, lost 0.1%, having dropped more than 1% at its low of the session. The fund is down 3% for 2018 thus far.

Read: Bank earnings are expected to shine, but their stocks may not

In the latest trade development, U.S. President Donald Trump was set to meet Britain’s Queen Elizabeth II on Friday. The president arrived in the U.K. on Thursday and in a bombshell interview with the Sun newspaper criticized British Prime Minister Theresa May. Trump said May’s plans for a “soft” Brexit would “kill” any potential trade deal between the U.S. and the U.K.

Thursday’s rally was partially driven by signs that Washington and Beijing are willing to resume trade talks, which investors hope could end in a bilateral agreement and avoid a trade war.

What are analysts saying?

“We’re pretty positive on the overall market; the 20% profit growth we’re expecting this quarter should be a fundamental anchor for stocks. But while financials have a good outlook, the results we saw today were mixed and the sector’s growth will probably underperform the S&P 500 this quarter,” said Anthony Saglimbene, global market strategist at Ameriprise Financial.

“Trade remains the key question hanging over markets, since much of the earnings story has probably been priced in, outside of beats or misses relative to expectations. There’s still a lot of uncertainty over trade, and that means markets will be volatile and rangebound over the summer. Some of this is noise, but more tariffs and retaliation can act as a wet blanket over the whole market. However, should the tensions cool, investors will pivot back to fundamentals, which remain positive.”

What’s new in economics?

The cost of import goods fell sharply in June to mark the biggest drop in about a year and a half, though the respite is unlikely to continue once tariffs between the U.S. and other countries go into affect.

Separately, a read on consumer sentiment fell to a six-month low of 97.1 in July, below expectations.

See: MarketWatch’s economic calendar

Stock movers

Shares of Johnson & Johnson JNJ, -1.41%  dropped 1.1% after the pharma company late Thursday was ordered to pay $4.69 billion in damages in a lawsuit linking baby powder to cancer.

AT&T Inc. T, -2.06%  declined 2.1% a day after the Justice Department filed an appeal of a ruling allowing the telecoms major to acquire Time Warner Inc. Raymond James downgraded the stock, saying the appeal was a “negative catalyst” for shares.

Advaxis Inc. ADXS, +17.62% jumped 18% after the Food and Drug Administration lifted a clinical hold on one of its drugs.

What are other markets doing?

Asian stock markets closed mainly higher, but the Shanghai Composite Index SHCOMP, -0.23%  ended lower after data showed Chinese imports grew less than expected in June. In Europe, equities were also on the rise and heading for weekly advances.

Crude-oil prices CLQ8, +0.75%  rose 0.7% while gold GCQ8, -0.32%  dropped 0.5% to $1,240.70 an ounce. The ICE Dollar Index DXY, +0.01%  climbed 0.3%.

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