U.S. Stocks Extend Gains as Banks Kick Off Earnings Season
By Anna Hirtenstein and Gunjan Banerji
The Dow Jones Industrial Average raced higher late in the
trading day, clinching a third straight session of gains and its
biggest point and percentage advance of the month.
Investors recently have been weighing worries about an uptick in
coronavirus infections versus signs that the economy is slowly
recovering from the downturn.
Earnings season kicked off in earnest Tuesday 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.
"Investors continue to focus on good news and dismiss bad news,"
said Michael Farr, chief executive officer of Farr, Miller &
The Dow rose 556.79 points, or 2.1%, to 26642.59, its best day
since June 29. The S&P 500 gained 42.30 points, or 1.3%, to
3197.52. The tech-laden Nasdaq Composite advanced 97.73 points, or
0.9% to 10488.58, trailing behind its peers.
The moves marked a reversal from the previous session when a
rally in the equity market fizzled after California rolled back
some of its reopening plans, stoking fears about additional
Investors appeared to be offloading shares of some of the
technology heavyweights that had pushed the market higher in recent
months on Tuesday, analysts said.
"The highflying tech stocks have been sources of profit-taking.
The blue-chips have found a bid," Mr. Farr said.
Overall, investors are expecting corporate earnings among
companies in the S&P 500 to have fallen 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.
Shares of JPMorgan rose 56 cents, or 0.6%, to $98.21, lifting
the Dow. Citigroup's shares slipped $2.05, or 3.9%, to $50.15.
"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
Later this week, investors will be parsing results from Morgan
Stanley, Bank of America and Goldman Sachs.
The gloomy outlook was echoed by Federal Reserve governor Lael
Brainard. She said in remarks delivered online that she expects the
economic recovery to face headwinds and that "fiscal support will
Still, the stock market has been resilient despite the dour
outlook, buoyed by optimism about an eventual recovery and stimulus
from the Federal Reserve.
In government-bond markets, the yield on the U.S. 10-year
Treasury note slipped to 0.614%, 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 email@example.com and Gunjan
Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
July 14, 2020 17:19 ET (21:19 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.