Stocks post slight gains as an ugly week on Wall Street comes to a close

Bet­ter-than-ex­pected third-quar­ter earn­ings by banks lead up­swing

The Washington Post - - ECONOMY & BUSINESS - BY TAY­LOR TELFORD

U.S. mar­kets re­bounded Fri­day from a mid­week scare, in­clud­ing a jar­ring two-day loss of nearly 1,400 points for the Dow Jones in­dus­trial av­er­age. Fri­day’s turn­around was led by solid thirdquar­ter earn­ings from the na­tion’s big­gest banks.

It was a free­wheel­ing sell-off, marked by con­cerns about ris­ing in­ter­est rates, ten­sions over the trade war with China and a star­tling plunge in the tech sec­tor. But by Fri­day, stocks were on an up­swing af­ter JP­Mor­gan Chase, Wells Fargo and Cit­i­group all re­ported quar­terly prof­its. Their good news seemed to steady in­vestor nerves.

The Dow Jones in­dus­trial av­er­age fin­ished Fri­day with a gain of 287 points, or 1.2 per­cent, to 25,339. The blue-chip in­dex still ended the week with a sting­ing loss, down 4.2 per­cent.

The Stan­dard & Poor’s 500stock in­dex was up 1.4 per­cent Fri­day. The tech-heavy Nas­daq notched a 2.3 per­cent gain.

The 10-year Trea­sury yield climbed for the first time in three days, to 3.158 per­cent. Gold dropped slightly to $1,218.05 an ounce.

De­spite the week’s con­ta­gious panic, over­seas mar­kets also bounced back Fri­day. The Stoxx Europe 600 was up 0.3 per­cent. Ja­pan’s Nikkei stock av­er­age gained 0.5 per­cent, and Hong Kong’s Hang Seng in­creased 2.1 per­cent.

Sim­i­larly, con­sumer tech­nol­ogy com­pa­nies re­cov­ered, with shares of Net­flix up nearly 6 per­cent and Ama­zon up 4 per­cent af­ter suf­fer­ing tough losses ear­lier in the week.

Lisa Shalett, head of wealth man­age­ment in­vest­ment re­sources at Mor­gan Stan­ley, said that there was no cause for alarm and that the week’s losses were within the realm of the or­di­nary. But she urged in­vestors to trust their in­stincts. “This is one of those sell-offs that doesn’t feel scary be­cause, so far, it’s play­ing to the text­book,” Shalett said. “The mar­ket is very ra­tio­nally repric­ing risk. But we are con­cerned about the fu­ture look for earn­ings, so we are po­si­tion­ing out port­fo­lios in a very con­ser­va­tive way.”

Af­ter the Dow dropped 832 points Wed­nes­day, one of the worst sell-offs since Fe­bru­ary, Pres­i­dent Trump strongly crit­i­cized the Fed for the pace at which it’s been rais­ing rates, again sig­nal­ing that he wanted in­ter­est rates to re­main low.

“The Fed is mak­ing a mis­take. They’re so tight. I think the Fed has gone crazy,” he told re­porters while trav­el­ing in Penn­syl­va­nia on Wed­nes­day. “It’s a cor­rec­tion that we’ve been wait­ing for, for a long time. But I re­ally dis­agree with what the Fed is do­ing, okay?”

Con­cerns about in­ter­est rates had rat­tled bank stocks, with the KBW Bank In­dex sink­ing 5.8 per­cent from last week. But bank shares led the mar­ket as trad­ing opened Fri­day morn­ing, thanks to bet­ter-than-ex­pected third-quar­ter results at the be­gin­ning of earn­ings sea­son. JP­Mor­gan Chase re­ported a 24 per­cent jump in profit, to $8.38 bil­lion, mostly thanks to strong con­sumer busi­ness. Cit­i­group and Wells Fargo both eked out more fa­vor­able prof­its than an­a­lysts had pre­dicted.

The mar­kets have been on a his­toric climb — with the Dow and S&P each hit­ting dozens of new highs since 2016 — buoyed by a strong U.S. econ­omy and solid cor­po­rate earn­ings, which in­vestors are hop­ing will lead to strong re­tail per­for­mance in the up­com­ing hol­i­day sea­son, de­spite this week’s stum­ble, said Ivan Fein­seth, an an­a­lyst with Tigress Fi­nan­cial.

“The strong snap­back shows to me that the bulls are still in charge and the mar­ket does want to go higher,” Fein­seth said.

Early Thurs­day on CNBC, Na­tional Eco­nomic Coun­cil Di­rec­tor Larry Kud­low her­alded the ad­min­is­tra­tion’s eco­nomic poli­cies and as­sured the pub­lic that “the war on busi­ness is over.”

“We are the hottest econ­omy in the world,” Kud­low said. “. . . With all due re­spect, I don’t think this is any­thing re­sem­bling a sugar high.”

Trea­sury Sec­re­tary Steven Mnuchin met with Chi­nese cen­tral bank gov­er­nor Yi Gang at a World Bank con­fer­ence in In­done­sia on Thurs­day, a day af­ter he warned China against “com­pet­i­tive de­val­u­a­tion” of its cur­rency against the U.S. dol­lar as the trade war es­ca­lates. The ren­minbi had fallen “sig­nif­i­cantly” dur­ing the year, and the Trea­sury De­part­ment is mon­i­tor­ing this “very care­fully” to make sure China is not ma­nip­u­lat­ing its cur­rency to gain an ad­van­tage in the trade war, Mnuchin told the Fi­nan­cial Times.

Some found rea­son for op­ti­mism af­ter it was an­nounced that Trump would meet with Chi­nese leader Xi Jin­ping at next month’s Group of 20 sum­mit in Buenos Aires to dis­cuss the in­ten­si­fy­ing trade con­flict.

“Any kind of soft­en­ing of the ten­sions with China would be a huge cat­a­lyst for the mar­ket,” Fein­seth said.

“The strong snap­back shows to me that the bulls are still in charge.” Ivan Fein­seth, Tigress Fi­nan­cial an­a­lyst

MICHAEL NAGLE/BLOOMBERG NEWS

Traders on the floor of the New York Stock Ex­change. The Dow Jones in­dus­trial av­er­age rose Fri­day but still fin­ished the week with a loss.

NICO­LAS ASFOURI/AGENCE FRANCE-PRESSE/GETTY IMAGES

Screens at a se­cu­ri­ties com­pany in Bei­jing show stock price move­ments. Mar­kets over­seas also bounced back Fri­day.

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