U.S. Stocks Extend Gains as Banks Kick Off Earnings Season
July 14 2020 - 4:34PM
Dow Jones News
By Anna Hirtenstein and Gunjan Banerji
U.S. stocks turned higher Tuesday, accelerating toward the end
of the session, as investors parsed earnings results from the
biggest banks for insights on the health of the American economy
and its lenders.
The S&P 500 rose 1.3% after wavering earlier in the session.
The Dow Jones Industrial Average rose 2.1%. The Nasdaq Composite
advanced 0.9%.
A rally in the equity market on Monday had fizzled after
California rolled back some of its reopening plans, stoking fears
about additional lockdowns. Investors recently have been weighing
worries about an uptick in coronavirus infections versus signs that
the economy is slowing recovering from the downturn.
Earnings season kicked off in earnest this week with the latest
quarterly results from big banks. JPMorgan Chase's and Citigroup's
earnings beat analysts' estimates, but the firms' results
highlighted the extraordinary economic uncertainty ahead and a
worrisome outlook on the health of their corporate and consumer
clients. Both set aside billions of dollars for rising loan losses
as they girded for defaults.
Overall, investors are expecting corporate earnings among
companies in the S&P 500 to record a fall of 45% in the second
quarter from the year-earlier period, according to FactSet.
Financial companies within the S&P 500 are expected to take an
even bigger hit -- a roughly 57% drop.
Still, the stock market has been resilient despite the dour
outlook, buoyed by optimism about an eventual recovery and stimulus
from the Federal Reserve.
Shares of JPMorgan rose 0.6%, lifting the Dow, while Citigroup's
slipped about 4%.
"This shows that there's a three-speed recovery in the economy,"
said Sebastien Galy, a macro strategist at Nordea Asset Management.
"Some banks will be better positioned than others" during times of
volatility. He noted that JPMorgan, a key player in market-making,
is among the banks better poised to weather volatility.
Later this week, investors will be parsing results from Morgan
Stanley, Bank of America and Goldman Sachs.
In government-bond markets, the yield on the U.S. 10-year
Treasury note slipped to 0.617% in recent trading, from 0.638%
Monday. Bond yields and prices move in opposite directions.
In Europe, the pan-continental Stoxx Europe 600 fell 0.8%.
Industrial production in the eurozone is recovering more slowly
than expected and is still more than 20% lower than last year,
according to a Tuesday data release.
Fresh data showed that the U.K's economic expansion in May was
weaker than economists had expected, and output in Britain remains
around one-quarter below the level it had reached in February,
before the pandemic struck and the economy was shut down.
"For the U.K., it's a tough gig currently. The drop in GDP was
starker than on the Continent and now the bounceback is weaker,"
said Peter Schaffrik, global macro strategist at RBC Capital
Markets. "It's a pretty big miss."
In Asia, major benchmarks slipped after tensions between the
U.S. and China rose, prompted by Secretary of State Mike Pompeo's
comments on Monday that the Trump administration formally rejects a
swath of Chinese claims in the South China Sea. China's main stocks
gauge, the Shanghai Composite Index, declined 0.8%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Gunjan
Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
July 14, 2020 16:19 ET (20:19 GMT)
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