U.S. Stocks Close Higher as Bank Earnings Provide Lift
On April 12, 2019, S&P 500 soared higher in three consecutive weeks, thanks to the U.S. biggest banks (Menton, 2019). The stock market index surged by 0.5% in a week and the blue-chip index posted gains in two running weeks. A 0.7% surge was recorded in the broad index, registering 2907.41 points. Recently, the Fed has been slow on the stance to increase interest rates, raising concerns over the profit margins in the financial sector. Even though the high stock markets have been enabled by the nation’s larger banks, the overall banking sector has underperformed since its 14% gain is still lower than the broader index’s 16% rise (Menton, 2019). The healthy performance of the U.S. stocks was expected, although the degree anticipated was lower than the real score.
Financial stocks in the S&P 500 led with a 1.9% climb (Menton, 2019). JPMorgan Chase posted a 5% increase in profits, higher than the projections basing on the strength of its consumer bank. The bank’s shares of $111.21 translated to a 4.7% increase,the highest percentage since March 2016. On the other hand, Wells Fargo also gained in profits but its revenue showed a steady decline in all its businesses. As a result, the bank’s shares fell by 2.6% (Menton, 2019). Investors are expecting growth in the quarterly earnings by the big banks like Morgan Stanley, Bank of America, and Citigroup. Other companies that performed well in the S&P 500 index are Netflix, Jognson & Johnson, and Walt Disney, whose shares soared by 12% to record $130.06 (Menton, 2019). Chevron’s, a multinational energy company, shares dropped by 4.9% after acquiring Anadarko Petroleum, whose shares rose by 32% to trade at 61.78%, the company’s biggest gain since 1986.
The positive stock market performance was unexpected due to volatile domestic bond market and various poor economic reports that had instilled fear among investors. The China-U.S. stock war also reignited fears of poor performance of the stocks. Trade between China and U.S. is significant in the performance of the U.S. stocks performance. The wobbly relationship between the two largest economies raised concerns of a prolonged economic standoff, which could stall corporate profits and the general economic growth. The U.S. President, Donald Trump, announced via Twitter that the U.S.-China trade talks had made a “substantial progress” during the Washington’s discussion. Trump also added that he would delay the increase on Chinese goods’ tariff rates (Wells, 2019).
The gain witnessed was anticipated by experts. Moreover, the New York Stock Exchange advance/decline line stock chart, which is highly regarded in projecting stock market performance, indicated growth in stocks when it touched an all-time high hit in February (Decambre, 2019). Experts expressed a high level of confidence in the A/D line reading, which is reflected in the witnessed improvement in the U.S. stocks. However, the great performance has reignited worries due to the likelihood of the Fed resuming its pause on the China goods’ interest rates.
The positive three-week performance of the U.S. stocks, which was boosted by the nation’s renowned financial institutions, was anticipated by experts.Financial stocks on S&P 500 performed excellently, beyond the projected score. While the big banks were behind the U.S. stocks’ healthy performance, the general banking sector is still experiencing a slower growth. Further, the China-U.S. trade talks contributed positively in the upward trend witnessed in U.S. stock markets. With such impressive records, investors are looking forward to even higher performance by the big banks in the quarterly earnings.
Decambre, M. (2019, Feb 21). This stock-market gauge just hit an all-time high – and that’s bad news for bears”. MarketWatch. Retrieved from https://www.ft.com/content/a8b14798-3901-11e9-b856-5404d3811663
Menton, J. (2019, April 12). U.S. stocks close higher as bank earnings provide lift. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/global-stocks-waver-ahead-of-bank-earnings-reports-11555056886
Wells, P. (2019, Feb 25). US-China trade extension boosts stocks on merger Monday. Financial Times. Retrieved from https://www.ft.com/content/a8b14798-3901-11e9-b856-5404d3811663