Stocks Warily Edge Higher as Banks Report Earnings

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Stocks rose slightly Monday, as investors weighed several items.

The S&P 500 rose 0.2%, pulled higher by the gain in large cap stocks, as the Nasdaq rose 0.4%. The 10-Year Treasury yield fell to 0.72%. Yields fall when prices rise.

Investors have been favoring large cap tech this week, as it is a group of stocks that can grow through economic headwinds. The group has been viewed as rather defensive. Large cap growth is up more tan 2% this week, while large cap value is down a tick.

Cyclicals like consumer discretionary and oil edged up a few tenths of a percentage point.

Bank of America  (BAC) - Get Report missed revenue estimates by few hundred million dollars, posting a result of about $20 billion. It beat earnings per share estimates (51 cents v. 49 cents). Loan loss provisions were about $1 billion, down from $5 billion last quarter. Like other banks, the stock fell even after a fairly solid earnings report. The yield curve has been compressing and bank analysts note that bank stocks cannot gain momentum until loan demand and interest rates pick up. Bank of America fell more than 2%.

For the broader market, which is not exhibiting a convincing rally Wednesday, the positive trend in loan loss provisions has been outweighed by macro uncertainty. Generally, investors in the past few trading days have taken a rather defensive posture in markets as paused coronavirus vaccine trials among several large producers and a delayed fiscal stimulus deal puts further pressure on small businesses, employment and consumer spend.

Also, the producer price index showed a reading for the past month of a 0.4% increase versus estimates of 0.2%. Material stocks like United States Steal Company  (X) - Get Report and Nucor  (NUE) - Get Report rose more than 1%. Industrial stocks like Caterpillar  (CAT) - Get Report rose a few tenths of a percentage point. The data are backwards looking and weighed against the perviously mentioned forward-looking concerns, but investors are taking heart in the narrative that inflation and economic activity are generally picking up for the manufacturing sector. 

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