Health care, tech stocks buoy Wall Street
Banks lower after Bank of America, Goldman reported weaker profits
NEW YORK, Jan 15, (AP): Stocks are opening slightly higher on Wall Street, led by gains in health care and technology companies. United Health, the country’s largest health insurer, climbed 2.2% in early trading Wednesday after reporting solid quarterly results. Microsoft was also higher. Banks were broadly lower after Bank of America and Goldman Sachs reported weaker profits. The benchmark S&P 500 index rose 5 points, or 0.2%, to 3,289. The Dow Jones Industrial Average added 57 points, or 0.2%, to 28,996. The Nasdaq rose 24 points, or 0.3%, to 9,275. Bond prices rose. The yield on the 10-year Treasury note fell to 1.79%.
World shares were mostly lower on Wednesday as conflicting reports raised concerns over the likely outcome of a trade deal to be signed by the US and China.
Britain’s FTSE 100 edged 0.1% higher to 7,632, while the CAC 40 in Paris was down 0.2% at 6,028. In Germany, the DAX lost 0.2% to 13,431 after new figures showed the country’s economy grew just 0.6% last year, its weakest in years.
Wall Street looked set for a quiet start, with the future contracts for the Dow and the S&P 500 both down 0.1%.
Markets had regained upward momentum with expectations that Chinese and US officials will sign a preliminary trade agreement in Washington on Wednesday that will stave off a further escalation of tensions between the two biggest economies.
However, concern over whether the deal will stick overshadowed that optimism after US Treasury Secretary Steven Mnuchin said the deal will not reduce any punitive tariffs imposed on imports from China until after the two sides reach a further agreement.
“The only way the president will be reducing the tariffs is if there is a ‘Phase 2’ part of the agreement that is also fully enforceable,” Mnuchin said in an interview on Fox News.
“The US-China trade deal is like watching a live show in the theater of the absurd,” analyst Ipek Ozkardeskaya of Swissquote Bank said in a commentary, noting that the tariff cuts will not take effect immediately. “The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.”
The modest trade pact that President Donald Trump and China’s chief negotiator, Liu He, are scheduled to sign does ease some sanctions on China. Ahead of the signing, the US Treasury Department dropped the US designation of Beijing as a currency manipulator.
Mnuchin said that was because the trade deal includes a “fully enforceable” chapter on currency policies.
Beijing, meanwhile, will step up its purchases of US farm products and other goods.
Meanwhile, investors’ attention is also shifting to corporate earnings.
Wall Street expects corporate profits for S&P 500 companies in the last three months of 2019 to be down by 2%. That would be the first time that earnings for the S&P 500 would have declined four quarters in a row since the period ending in mid-2016, according to FactSet.
In other trading, benchmark crude oil rose 5 cents to $58.28 a barrel in electronic trading on the New York Mercantile Exchange. It gained 15 cents on Tuesday, to $58.23 per barrel.
Brent crude oil, the international standard, gained 1 cent to $64.50 per barrel. It gained 29 cents on Tuesday to $64.49 a barrel.
Gold rebounded, gaining $8.00 to $1,552.60 per ounce.
The dollar slipped to 109.88 Japanese yen from 109.97 yen on Tuesday. The euro rose to $1.1145 from $1.1128.
Shares retreated in Asia on Wednesday as conflicting reports raised concerns over the likely outcome of a trade deal to be signed by the US and China.
Japan’s Nikkei 225 index lost 0.5% to 23,916.58 while the Hang Seng in Hong Kong dropped 0.6% to 28,722.86. The Shanghai Composite index gave up 0.5% to 3,090.04. In South Korea, the Kospi slipped 0.4% to 2,230.98. Shares also fell in Taiwan and in Southeast Asia. But the S&P ASX 200 climbed 0.5%, breaching an intra-day record high, to 6,994.80, on optimism over the preliminary trade agreement due to be signed later in the day.
The declines followed a mixed session on Wall Street Tuesday as investors parsed the latest indications on trade relations between the two largest economies. Traders were spooked by a report that US tariffs would remain in place on Chinese goods even after a preliminary deal is signed Wednesday.
The Wall Street Journal reported that the Trump administration was preparing to further tighten controls on technology exports to Huawei Technologies.
The trade deal may only mark a “detente” in trade tensions, said Stephen Innes of AxiTrader.
“But I think after two years of trade war noise, hopefully, the markets have learned to take all the bluster with a grain if not a barrel of salt,” Innes said.
Overnight, major US stock indexes shed most of their gains from earlier in the day after a report said the interim trade deal between the US and China does not remove tariffs on Chinese goods.
Technology stocks accounted for much of the selling. The sector is particularly sensitive to developments in trade relations because many of the companies rely on China for sales and supply chains.
Nvidia led Tuesday’s slide, dropping 1.9%. Health care stocks led the gainers, receiving a big boost from Perrigo, which vaulted 12.6%. Boston Scientific fell 6.2% after giving Wall Street a weak fourth-quarter sales update.
“Would the market be more satisfied with a reduction in those tariffs? Absolutely,” said Quincy Krosby, chief market strategist at Prudential Financial. “Nonetheless, you don’t want to have an escalation in the tariff war. That was the most important thing for the market.”
Bond prices rose. The yield on the 10-year Treasury slipped to 1.81% from 1.84% late Monday.
President Donald Trump and China’s chief negotiator, Liu He, are scheduled to sign a modest trade pact Wednesday that calls for the US to ease some sanctions on China. The US dropped its designation of China as a currency manipulator ahead of the signing.
Beijing, meanwhile, will step up its purchases of US farm products and other goods.
While the deal is limited in its scope, investors hope it will prevent further escalation in the conflict that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy.
With the trade issue entering a new stage, Wall Street is focusing on the rollout of corporate earnings reports over the next few weeks.
Several large banks were among the companies that kicked off the latest earnings season on Wall Street Tuesday.
JPMorgan Chase rose 1.2% after the banking giant reported a surge in profits because of a blowout quarter from its trading desks. The earnings handily beat analysts’ forecasts. Citigroup climbed 1.6% after reporting a similar jump in profits because of its trading operations.
Wells Fargo did not fare as well. The bank’s stock slumped 5.4% as its profit and revenue dropped because of hefty costs and lower interest rates. Wells Fargo is still under growth restrictions by regulators after years of missteps, beginning in 2016 with the uncovering of millions of fake checking accounts its employees opened to meet sales quotas.
Delta Air Lines rose 3.3% after the company increased its fourth-quarter profit to $1.1 billion by adding more flights over the holiday period and packing them even more full of passengers. The results beat Wall Street’s forecasts.
Delta’s solid report helped lift some of its rivals. United Airlines rose 1.1% and American Airlines gained 0.5%.
Wall Street expects corporate profits for S&P 500 companies in the last three months of 2019 to be down by 2%. That would be the first time that earnings for the S&P 500 would have declined four quarters in a row since the period ending in mid-2016, according to FactSet.