Earnings in Focus. Stocks ended the day with mixed results, with all three major indexes finishing not far from the flat line. Corporate earnings came into focus this week, led by major banks and Delta Air Lines (ticker: DAL). A day ahead of the signing of an initial U.S.-China trade deal, the Treasury Department officially dropped the “currency manipulator” label against China. At the same time, the House will vote on Wednesday to send the impeachment charges against President Donald Trump to the Senate, which expects to start the trial next Tuesday. GameStop stock (GME) plunged after the company reported soft holiday sales. Visa (V) said it’s buying fintech company Plaid for $5.3 billion. In today’s After the Bell, we…
- look at the good and bad in big bank earnings;
- check on the latest inflation data;
- and wonder if tariffs on Chinese imports will be rolled back, and if trade will pick up.
Bully for Banks
All three major indexes closed in the black on Monday. The Dow Jones Industrial Average edged up 32.62 points, or 0.11%, to close at 28,939.67. The S&P 500 slipped 4.98 points, or 0.15%, to end at 3283.15, and the Nasdaq Composite lost 22.60 points, or 0.24%, to close at 9251.33.
Big banks kicked off the fourth-quarter earnings season with an upbeat note. JPMorgan Chase (JPM) and Citigroup (C) stock both rose on Tuesday after the banks posted earnings that beat Wall Street expectations. The strong growth was fueled by their investment banking units as well as a surge in fixed-income trading. Consumer trends and credit quality also remain positive for the banking industry. At the same time, Wells Fargo stock (WFC) tumbled after a disappointing report. This is the first earnings report under the bank’s new CEO Charles Scharf, who was brought in last year to fix the embattled bank.
The consumer-price index rose 0.2% in December, the government said on Tuesday, slightly below the consensus forecast for a 0.3% advance. With the final month’s data in, consumer inflation for all of 2019 reached 2.3%, up from the 12-months inflation figure of 2.1% as of November. The 12-months rate hit the highest mark since October 2018, but it is still quite low by historical standards.
If inflation remains under control in 2020, the Federal Reserve will likely stay put and not raise interest rates. Low rates should help the economy to expand for an 11th straight year, continuing a record run. Another important inflation gauge, the producer-price index, will be released on Wednesday. Economists are expecting a 0.3% rise from the prior month.
Chinese exports in December unexpectedly rose 7.6% from the year-ago period, much stronger than a consensus estimate for growth of 2.9%, and marking the country’s first increase in exports since March. Boosted by China’s renewed purchases of U.S. pork and soybeans, overall imports for the country rose 16.3%, well beyond the consensus of 9.6%, and November’s 0.3% increase.
Still, for the full year, Chinese total exports only increased 0.5% in 2019, down sharply from the 9.9% growth in 2018. With the “phase one” trade deal to be signed soon, many are expecting the U.S. to roll back some existing tariffs and China to purchase more American farm products. In that case, the trade activities between the two countries should pick up again.
However, a report on Tuesday said that existing tariffs on Chinese imports would likely stay in place until after the U.S. elections and any reduction would depend on Chinese compliance with the new agreement.
Stocks dropped following the news. We shall see how it turns out tomorrow.
Write to Evie Liu at firstname.lastname@example.org