Big bank rally helps stocks finish higher
NEW YORK — Banks surged Wednesday following strong results from a slew of financial companies, and U.S. stock indexes finished broadly higher. Concerns about trade tensions between the U.S. and China derailed a bigger gain.
Financial and investment companies surged as fourthquarter reports from Wall Street continued to roll in. Goldman Sachs’ stock had its best day in 10 years, and Bank of America its best in seven. Banks were some of the chief beneficiaries of the corporate tax cut that took effect at the end of 2017, which fattened their balance sheets, but their stocks endured a rough year in 2018.
Willie Delwiche, an investment strategist at Baird, said it will be a good sign for the stock market and the economy if banks continue to report strong results and their stocks keep rallying.
U.S. indexes were on track for larger gains before the Wall Street Journal reported that federal prosecutors could bring criminal charges against Chinese tech company Huawei related to alleged theft of trade secrets from U.S. companies. Huawei has been at the center of the trade and technology policy dispute between the U.S. and China, and charges against the company could increase tensions between Washington and Beijing.
The S&P 500 index gained 5.80 points, or 0.2 percent, to 2,616.10 after rising as much as 0.6 percent during the day. The S&P 500 is up 4.4 percent so far in January.
The Dow Jones Industrial Average added 141.57 points, or 0.6 percent, to 24,207.16. The Nasdaq composite rose 10.86 points, or 0.2 percent, to 7,034.69.
Smaller companies, especially small banks, did better than the rest of the market. The Russell 2000 index rose 9.48 points, or 0.7 percent, to 1,454.70.
Goldman Sachs posted strong results from its advisory business in the fourth quarter even though its trading business, like the rest of Wall Street, struggled as stock and bond markets went through huge swings. While some volatility gives traders an opportunity to make money, several financial firms have said last year’s swings were far too large for that. The S&P 500 fell 7 percent in October and then tumbled 9 percent in December, its worst month in nearly a decade.
Goldman’s stock jumped 9.5 percent to $197.08 after a steep slump over the past 10 months. Bank of America climbed 7.2 percent to $28.45 after its profit surged thanks to last year’s steady rise in interest rates, which has allowed it to charge customers more to use credit cards or take out a mortgage. Bank of America’s consumer banking business is by far its largest division by revenue and profits.
Investment firm BlackRock rose 3.1 percent to $413.04 and regional bank Comerica picked up 5.5 percent to $78.13 after they reported their quarterly results.
Britain’s FTSE 100 stock index slipped 0.5 percent after Parliament rejected the deal negotiated by Prime Minister Theresa May with European leaders over the country’s departure from the European Union. Ms. May’s government survived a vote of no confidence after the close of trading in the U.K.
Economists warn that an abrupt break with the EU on March 29 could batter the British economy, which would face new tariffs and other trade barriers. Chaotic scenes at borders, ports and airports could also follow. But since investors have expected that outcome for some time, British stocks didn’t make big moves as Ms. May’s deal foundered. The pound rose to $1.2876 from $1.2834. It’s fallen 6.6 percent in the past 12 months.
Fiserv is buying First Data in a $22 billion all-stock deal, creating a giant player in the payments and financial technology sector. First Data surged 21.1 percent to $21.24 and Fiserv lost 3.3 percent to $72.57.
Snap slumped again after the social media company said its chief financial officer is leaving after just eight months on the job. Tim Stone is the second Snap CFO to leave in the past year and he’s part of a string of top executives who have left in recent months. A redesign of Snapchat’s service has also been heavily criticized by users.
Snap traded above $20 last February, but Wednesday’s loss of 13.8 percent brought it down to $5.64.