Stocks Rise as Earnings Season Ramps Up -- Update
January 19 2021 - 4:31PM
Dow Jones News
By Anna Hirtenstein and Alexander Osipovich
U.S. stocks climbed as Janet Yellen endorsed higher coronavirus
relief spending and some of the country's biggest banks beat
expectations for fourth-quarter earnings.
The Dow Jones Industrial Average rose 116 points, or 0.4%, as of
the 4 p.m. close of trading Tuesday in New York. The S&P 500
advanced 0.8%, while the technology-heavy Nasdaq Composite jumped
1.5%.
The gains came as U.S. markets reopened after a long holiday
weekend, marking an upbeat start to the week, after all three major
indexes posted declines last week.
Ms. Yellen backed major fiscal stimulus to help workers and
businesses battered by the coronavirus pandemic as she testified
before the Senate Finance Committee, which will vote on her
nomination for Treasury secretary. In prepared remarks, she said
the U.S. risks a longer, more painful recession unless Congress
approves more aid, and encouraged lawmakers to "act big" to shore
up the recovery.
President-elect Joe Biden unveiled a plan for a $1.9 trillion
fiscal stimulus package last week, which would include direct
payments of $1,400 to most households and spending on vaccine
distribution. Passing it through Congress is one of the first major
tests for the incoming leader, who will be inaugurated
Wednesday.
Ms. Yellen will be the "holder of the keys of unprecedented
spending," said Ludovic Subran, chief economist at Allianz. "It
will be reassuring for people to see she's very pragmatic in the
way that she addresses the crisis, similarly to how she was in her
role at the Fed."
Earnings season kicked into high gear. Shares of Bank of America
slipped less than 0.1% after it reported a 22% profit decline in
the fourth quarter, but still came ahead of analysts' forecasts.
Goldman Sachs slumped 1.9% despite releasing earnings that
significantly beat expectations.
Netflix is expected to report results after markets close.
Major banks' earnings suggest they are "seeing the economy
stabilize; their worst-case scenarios haven't been met," said
Shaniel Ramjee, a multiasset fund manager at Pictet Asset
Management. "Even if the virus is still with us, banks are seeing
an uplift in the economy."
Investors are keeping a close eye on the rollout of Covid-19
vaccines, which has hit early snags as the U.S. has struggled to
deliver limited supplies of the inoculations to the most vulnerable
segments of the population. A vast swath of the country must be
vaccinated before the economy can return to pre-pandemic levels of
activity, particularly in the travel and leisure sectors.
"That normalization date keeps getting pushed out with the
various logistical challenges of rolling out the vaccines," said
Ben Kirby, co-head of investments at Thornburg Investment
Management.
Eight of the S&P 500's 11 sectors were in positive territory
on Tuesday. Energy stocks posted the biggest gains, boosted by
rising oil prices. Futures on Brent crude, the global oil
benchmark, gained 2.1% to $55.89 a barrel on hopes that stimulus
and vaccinations will boost energy demand.
Shares of General Motors rallied 9.6% after its driverless-car
startup, Cruise, said it had entered into a technology partnership
with Microsoft, which is also joining a group of companies set to
invest more than $2 billion in Cruise. The stock is on course for a
new high.
Shares of big tech and social-media companies climbed, after
faltering last week. Facebook rose 3.5%, while Twitter was up
1.9%.
"There's a 'buy the dip' mentality," said Sebastien Galy, a
macro strategist at Nordea Asset Management. "Cynicism doesn't last
long. It shows that equities can still rally significantly
more."
In other corporate news, shares of laser maker Coherent surged
32% after it agreed to be acquired by Lumentum, a computer
components firm. Lumentum stock fell 11%.
Overseas, the pan-continental Stoxx Europe 600 declined 0.2%.
Jeep-owner Stellantis, the recently combined business of Fiat
Chrysler and PSA Group, gained 2.6%, extending Monday's pop after
it made its debut on French and Italian exchanges.
In Asia, most major benchmarks rose. Hong Kong's Hang Seng Index
advanced 2.7% and Japan's Nikkei 225 index added 1.4%, led by
shares of tech and car companies. The Shanghai Composite Index
slipped 0.8%.
In U.S. bond markets, the yield on the benchmark 10-year
Treasury note slipped to 1.092% from 1.097% Friday, with the market
closed Monday for Martin Luther King Jr. Day.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and
Alexander Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
January 19, 2021 16:16 ET (21:16 GMT)
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