Stocks finished higher Tuesday as investors parsed the latest retail sales data and a fresh batch of corporate earnings reports. Blue chip stocks handily outperformed thanks to an impressive beat from insurance giant UnitedHealth Group (UNH), though not all of the day's other results were as well-received.
Starting with the economic calendar. Ahead of the bell, data from the Census Bureau showed retail sales were flat from May to June, beating economists' estimate for a 0.3% monthly decline. The report also showed that May retail sales were upwardly revised to an increase of 0.3% vs the initial reading of 0.1%.
To be sure, the June data point to "signs of softness around the edges where low and moderate-income consumers are pulling back, like the weakness of food service and drinking place spending in the first half of this year," says Bill Adams, chief economist at Comerica Bank. However, there was a solid increase in goods spending in Q2 and the "economy is in pretty good shape," he adds.
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While Adams believes the Fed will hold interest rates steady at its July meeting, "a rate cut looks quite likely" in September.
Bank of America gets downgraded to Sell after earnings
In earnings news, Bank of America (BAC) stock rallied 5.4% after the big bank reported higher-than-expected earnings and revenue in its second quarter. The company also posted net interest income (NII) that matched Wall Street's estimates.
However, not everyone was upbeat about BAC's earnings results. CFRA Research analyst Kenneth Leon, for one, downgraded the financial stock to Sell from Hold after the results, citing expectations for low NII and loan growth in the near term.
Charles Schwab sinks as deposits drop
Fellow financial firm Charles Schwab (SCHW), meanwhile, plunged 10.2% after earnings. While SCHW beat on the top and bottom lines in its second-quarter report, it disclosed a 17% year-over-year decline in deposits.
Still, CFRA Research analyst Caydee Blankenship maintained a Strong Buy rating on Charles Schwab. While declining deposits create concern over the company's ability to maintain its net interest revenue, "the Ameritrade transition will be fruitful in the longer term, despite the continued management needed through the transition period," she wrote in a note to clients.
UnitedHealth pops on solid Q2 earnings
Outside of the financial sector, health insurance giant UnitedHealth disclosed Q2 earnings of $6.80 per share on $98.9 billion in revenue – more than analysts expected.
UNH also said that the number of folks served by its domestic commercial offerings climbed 9% year-over-year to 29.6 million, while those using its Medicare Advantage plans rose 2.3% to 7.8 million.
At roughly $550, UNH has the greatest weighting of all 30 stocks in the price-weighted Dow Jones Industrial Average, so the stock's 6.5% gain today helped push the index 1.9% higher to 40,954 – a new record closing high.
The S&P 500 also notched its highest close on record, adding 0.6% to 5,667, while the Nasdaq Composite rose 0.2% to 18,509.
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