Treasuries Surge as Inflation Cools | A Positive Outlook for Bank Stocks | Stock Market

All eyes are on US bank earnings as JPMorgan, Wells Fargo, and Citigroup kick off the second-quarter earnings season with their results due on Friday. The shares of the biggest Wall Street lenders have outperformed the broader market this year, with investors anticipating an optimistic outlook for bank earnings in the coming quarters. Despite an expected drop in net interest income, a crucial revenue source for lenders, investors are hopeful about the potential growth in fee-generating businesses like investment banking. David Konrad, an analyst with Keefe, Bruyette & Woods, stated, "I think near-term that momentum will continue" for bank stocks.

Treasuries Gain Favor Among Investors

Similar to banks, Treasuries are gaining favor among investors, having erased this year’s declines as cooling inflation fuels expectations for Federal Reserve interest-rate cuts. Traders are now hopeful for three reductions in borrowing costs this year, following Thursday’s data that showed US inflation slowed more than expected. A report on producer prices is due on Friday, and further evidence of decreasing price pressures could strengthen the outlook for rate cuts. Nick Twidale, chief analyst at ATFX Global Markets in Sydney, remarked, “Comments from Fed officials will be even more closely monitored in coming weeks, but it does feel like the turn is now coming for Treasury bulls.”

US Election Uncertainty and Biden’s NATO Summit Gaffes

Investors continue to navigate uncertainty surrounding the US election, with President Joe Biden affirming his commitment to the 2024 presidential race despite making two critical mistakes at the NATO summit. On Thursday afternoon, Biden mistakenly introduced Ukrainian President Volodymyr Zelenskiy as Russian President Vladimir Putin. Later, at the opening of a press conference, he fumbled a question about Vice President Kamala Harris by saying he “wouldn’t have picked Vice President Trump to be vice president” if he did not have confidence in her. These gaffes punctuated an otherwise confident performance from Biden, who discussed a range of complex issues from the tax code and trade policy to Russia and the Israel-Hamas conflict.

Summary:

This week marks the beginning of the second-quarter earnings season for major US banks, with positive expectations despite a potential decline in net interest income. Treasuries are also gaining traction as cooling inflation raises hopes for Fed rate cuts. Meanwhile, political uncertainty continues with President Biden's recent missteps at the NATO summit.