Dow Industrials Tick Higher as Banks Report Strong Results
January 14 2020 - 3:24PM
Dow Jones News
By Anna Isaac and Paul Vigna
The Dow Jones Industrial Average edged higher Tuesday as big
banks kicked off fourth-quarter earnings season with mostly strong
results.
The blue-chip index ticked up 0.2%, while S&P 500 and the
technology-heavy Nasdaq Composite wavered between small gains and
losses.
Financial stocks were among the best performers in the S&P
500, rising 0.4%, after JPMorgan Chase and Citigroup reported
strong results.
Companies in the S&P 500 are expected to report a
fourth-quarter earnings decline of 2.4% from the year earlier,
according to Factset. That would mark the fourth consecutive
quarter of lower earnings, the longest such stretch since a period
from 2015 to 2016.
The equity market's recent gains have come as corporate earnings
growth in the U.S. has slowed sharply, said Ben May, the director
of global macro research at Oxford Economics, resulting in
stretched valuations. So while the fourth-quarter numbers are
important, more critical will be what executives say about the rest
of 2020.
"It perhaps creates more downside risks if the economy
underperforms or earnings don't improve to the extent expected," he
said.
Banks got off to a mostly strong start to earnings season,
though. Dow component JPMorgan and rival Citigroup reported
strength in their investment banks in the last three months of
2019. JPMorgan rose 1.6%, Citi 2.2%. Those gains helped push the
Nasdaq KBW Bank index up 0.5%.
But Wells Fargo fell 4.8% after reporting its profit sank due to
legal costs incurred from problems in its sales practices.
Stocks lost some of their momentum in afternoon trading
following a Bloomberg report that U.S. tariffs are likely to stay
in place until after the election.
Still, the moves weren't significant in either direction, said
Frank Cappelleri, the executive director of brokerage Instinet.
In fact, he said, equities have been unusually calm since about
mid-October, and that itself is the more important trend to watch.
"That type of market calm can't last forever," he said. "It's just
a matter or when and what's going to cause it." Like others, he was
looking to the coming earnings season for catalysts.
In other corporate news, Delta Air Lines rose 3.3% after the
airline said lower fuel prices and strong demand over the holidays
helped boost its profit, which exceeded analysts' expectations.
Meanwhile, Boston Scientific fell 6.3% after the medical-devices
maker warned its sales would fall shy of expectations.
Also, Visa rose 0.3% after it agreed to buy fintech firm Plaid
for $5.3 billion.
Overseas, the Shanghai Composite Index closed for the day down
0.3%, while the pan-continental Stoxx Europe 600 index edged up
0.3%.
Exports from China climbed by 0.5% last year, a sharp comedown
from 2018's expansion of nearly 10%, according to data released
Tuesday. Imports dropped 2.8% last year.
While the slowdown comes amid a two-year trade war between the
world's largest economies, China's foreign trade revived in
December as tensions ebbed following signals that Washington was
nearing a trade deal with Beijing. Investors in recent days have
been cautiously optimistic about that accord as they await more
information on the specific terms of the agreement.
China has committed to buying almost $80 billion of additional
manufactured goods from the U.S. over the next two years, Reuters
reported on Tuesday. The Asian giant would also purchase more than
$50 billion more in energy supplies, and boost spending on U.S.
services by roughly $35 billion, the news agency said, citing a
person with knowledge of the matter.
"The overall mood music is positive, but the key thing is what
the actual wording of the agreement is," said Edward Park, deputy
chief investment officer in London for Brooks Macdonald Asset
Management. "Investors need to see real progress on
U.S.-China."
Separately, China's currency strengthened to its strongest level
since July in offshore trading after the U.S. on Monday dropped it
from a list of currency manipulators, days before the likely
signing of a phase-one trade deal. The yuan pared back its gains
later in the day.
Write to Anna Isaac at anna.isaac@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
January 14, 2020 15:09 ET (20:09 GMT)
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