Stocks rose Tuesday as some of the first major corporate names began delivering third-quarter results. Meanwhile, investors continued to monitor signs that President Donald Trump’s “phase one” trade deal with China would materialize.
Better-than-expected earnings results from Dow components UnitedHealth (UNH), Johnson & Johnson (JNJ) and JPMorgan (JPM) helped lift the 30-stock index more than 100 points shortly after market open. Gains accelerated as the session progressed.
Here’s where the markets settled Tuesday:
S&P 500 (^GSPC): +1.00%, or 29.53 points
Dow (^DJI): +0.89%, or 237.44 points
Nasdaq (^IXIC): +1.24%, or 100.06 points
Crude oil (CL=F): -1.5% to $52.81 per barrel
Gold (GC=F): -0.84% to $1,485.00 per ounce
A vacillating narrative around prospects of a “phase one” U.S.-China trade deal continued into Tuesday, with Bloomberg reporting that China may need to remove retaliatory tariffs on U.S. products in order to meet its agreement to purchase some $50 billion of U.S. agricultural goods. However, according to the report, doing so would require a reciprocal tariff reduction on the part of the Trump administration – a move Washington has not indicated it would be willing to pursue.
The report undermines earlier optimism that the U.S. and China would get their preliminary agreement in writing within the next several weeks, and stock futures pared some gains following Bloomberg’s report. Earlier, Hu Xijin, editor in chief of the Chinese state-run Global Times media outlet, wrote in a Twitter post that “China has the market demand to buy $40 billion-$50 billion worth of US farm products. China won't make a commitment that it can't honor; once it promises, it will fulfill it.”
Other geopolitical concerns continued to play out in the background.
Late Tuesday, President Donald Trump announced he was authorizing sanctions and increasing steel tariffs on Turkey to 50% as a response to Ankara’s military offensive in northern Syria. These measures, however, were widely viewed as lighter punitive actions than had been anticipated, and the Turkish lira – the worst performing currency this month – was little changed amid the announcement.
However, the ongoing Turkish military offensive in Syria has had other repercussions for the emerging economy. Volkswagen AG (VOW3.DE), the world’s largest carmaker, said it was postponing a planned $1.4 billion investment for a new plant in Turkey, given the country’s military operation.
Earnings season kicks off
Big banks began reporting quarterly results Tuesday morning, with JPMorgan (JPM) topping consensus expectations on the top and bottom lines. The biggest U.S. bank by assets retained its No. 1 position in global investment banking fees, with revenue in this segment climbing 8.1% year-over-year to $1.87 billion.
Heading into the third-quarter earnings season, banks were expected to show weaker net interest margins, reflecting the amount banks collect in interest on loans less interest paid on deposits. The Federal Reserve’s two interest rate cuts this year and a flattening yield curve were each expected to pressure this measure of bank profitability, with both JPMorgan and Wells Fargo last quarter guiding toward worsening net interest margin.
JPMorgan’s results on this measure were mostly in-line with guidance. Net yield on interest-earning assets was 2.41%, down from the 2.51% posted last year, but within Wall Street’s expected range of between 2.37% and 2.45%.
In a statement, JPMorgan CEO Jamie Dimon underlined a mixed picture in the domestic economic environment.
“The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels,” Dimon said. “This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade.”
Amid this environment, however, another “bulge bracket” bank struggled to outperform against consensus. Goldman Sachs (GS) missed consensus expectations for quarterly profit, with CEO David Solomon calling out a “mixed operating environment” during the period.
While Goldman Sachs beat consensus expectations for total revenue, beneath the headline, net revenues in equity securities fell 40% year-over-year, due to “significantly lower net gains from investments in private equities as well as net losses from investment in public equities.”
Meanwhile, Citigroup (C) beat expectations on both quarterly revenue and profit. Wells Fargo (WFC) posted mixed third-quarter results, with earnings missed expectations but revenue coming in ahead of expectations. The bank named Charles Scharf, formerly chairman and CEO of BNY Mellon, as CEO last month. He’s set to take the helm of the bank on Monday.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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