Weak oil prices offset Bank of America-led earnings optimism

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(July 16): US stocks were trading flat on Monday as a sharp drop in crude oil prices weighed on energy companies, offsetting a rebound in financials stocks after Bank of America's strong results reinforced expectations of a strong earnings season.

Benchmark Brent crude dropped 2.9%, while US light crude fell 2.6% as concerns about supply disruptions eased and Libyan ports reopened, while traders eyed potential supply increases by Russia and other oil producers.

The S&P energy sector fell 1.11%, the most among the 11 major S&P sectors. Shares of Chevron and Exxon slid more than 1% and were the biggest drags on the benchmark index.

Bank of America rose 2% after the second-largest US lender's quarterly profit beat analysts expectations on lower expenses and growth in loans and deposits.

In contrast to a slide on Friday after JPMorgan, Citigroup and Well Fargo reported results, bank stocks gained, leading to a 0.99% gain in the financial sector.

With a host of companies expected to report this week, analysts have forecast a near 21% surge in second-quarter earnings for S&P 500 companies, according to Thomson Reuters I/B/E/S.

Of the 27 S&P companies that have reported earnings through Friday, 85.2% have topped earnings expectations, above the 75% average of the past four quarters.

"What will be interesting in this earnings season apart from what we know, is what the guidance will sound like, with the trade wars going on and tariffs being put in place," said Art Hogan, chief market strategist at B. Riley FBR in New York.

"We are probably going to have some cautious guidance as a lot of the multinational companies would've priced in the bad news."

At 9:55 am EDT the Dow Jones Industrial Average was up 17.00 points, or 0.07%, at 25,036.41, the S&P 500 was down 0.93 points, or 0.03%, at 2,800.38 and the Nasdaq Composite was up 2.20 points, or 0.03%, at 7,828.18.

The Commerce Department said US retail sales increased 0.5% in June, boosted by increases in purchases of motor vehicles and a range of other goods.

Data for May was revised higher to show sales rising 1.3% instead of the previously reported 0.8% gain. But the unchanged reading in core retail sales last month likely does not change views that consumer spending accelerated in the second quarter.

Among stocks, shares of Arconic jumped nearly 12% on a report that the aerospace-parts maker is the subject of takeover interest from private-equity firms.

J.B. Hunt Transport rose 1.6% after reporting better-than-expected quarterly results. The stock was the biggest boost to the Dow Jones Transport index, which was up 0.47%.

Netflix rose 1.1% ahead of its earnings report, expected after markets close. Amazon.com Inc also gained 0.7% as its 'Prime Day' shopping event kicked off.

Declining issues outnumbered advancers for a 1.51-to-1 ratio on the NYSE and for a 1.26-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and two new lows, while the Nasdaq recorded 40 new highs and 20 new lows.