U.S. Stocks Rise as Bank Earnings Kick Off
April 12 2019 - 12:28PM
Dow Jones News
By Paul J. Davies and Jessica Menton
U.S. stocks advanced Friday after two of the nation's biggest
banks reported earnings that beat expectations.
The Dow Jones Industrial Average rose 189 points, or 0.7%, to
26335. The S&P 500 climbed 0.4% and the tech-heavy Nasdaq
Composite added 0.2%. The S&P 500 is up 0.4% for the week, with
the broad index and the Dow industrials both sitting less than 2.5%
from their records.
Financial stocks in the S&P 500 led the market higher
Friday, climbing 1.3% as earnings season kicked off. Shares of
JPMorgan Chase jumped 4.2% after the nation's largest bank by
assets said its profit rose 5% and topped analysts' expectations on
the strength of its consumer bank. Meanwhile, Wells Fargo, the
fourth largest in the U.S. by assets, s aid that first-quarter
profit rose , though revenue continued to decline across all of its
businesses. Shares of Wells Fargo fell 2.8%.
The Federal Reserve's recent shift to a more patient stance on
raising interest rates has renewed concerns over the banking
sector's profitability. Banks have underperformed the broader stock
market since a big drop mid-March. S&P 500 financial stocks
have recovered some losses in the past week, but their 13% rise
this year lags behind the broader index's 16% climb.
"It was a better-than-expected quarter for the banks, which was
encouraging to see," said Carter Henderson, portfolio specialist
and director of institutional development at Fort Pitt Capital
Group. "But I think that's as good as it's going to get for these
big banks this year because in the first quarter they were still
getting that tailwind from the last Fed hike in December."
Investors are looking ahead to next week's batch of quarterly
earnings results, which includes more big-bank results from Goldman
Sachs, Citigroup, Bank of America and Morgan Stanley. Health-care
company Johnson & Johnson and video-streaming giant Netflix are
also on tap. Profits at companies in the S&P 500 are projected
drop 4.3% in the first quarter from a year ago, according to
FactSet.
Investors will also parse data on housing and retail sales next
week for further insight into the health of the U.S. economy. Data
on Friday showed consumers' outlook on the economy worsened in
April, a sign that the effects from tax cuts could be starting to
fade. The University of Michigan said Friday its preliminary index
of consumer sentiment was 96.9 this month, down from March's final
reading of 98.4.
Bill Northey, a senior investment director at U.S. Bank Wealth
Management, said American consumers are still in a relatively
healthy position due to strong job creation and a pick up in wage
growth.
"The U.S. consumer is in reasonably good shape, but it can't be
disconnected from the pace of slowing growth for the overall
economy," Mr. Northey said. "We think there will be a modest
downshift in growth, but that's still a healthy environment and one
in which consumers can continue to spend."
In Friday's action, Chevron shares fell 6.9% after the
multinational energy company agreed to buy Anadarko Petroleum in a
cash-and-stock deal valued at roughly $33 billion as the company
looks to strengthen its market positions in large shale projects.
Anadarko's shares soared 33%, on pace for their biggest percentage
increase on record based on data going back to 1986, according to
Dow Jones Market Data.
Walt Disney shares jumped 11% to $127.30 to a new high after the
company updated investors on plans for its new streaming service
Disney+.
U.S. 10-year Treasury yields climbed to 2.545%, according to
Tradeweb, from a close of 2.498% Thursday. Yields rise when bond
prices fall.
The WSJ Dollar Index, which measures the dollar against a basket
of other currencies, edged down 0.2%.
Elsewhere, the Stoxx Europe 600 rose 0.2%. In Asia, Chinese
stocks were down slightly in Shanghai and Shenzhen.
--Paul J. Davies contributed to this article.
Write to Paul J. Davies at paul.davies@wsj.com and Jessica
Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
April 12, 2019 12:13 ET (16:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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