Dow closes flat, bank shares jump led by JP Morgan
The Dow Jones Industrial Average closed little changed in volatile trading Tuesday as J.P. Morgan Chase led bank shares higher on the back of strong quarterly results.
J.P. Morgan Chase posted quarterly earnings and revenue that beat analyst expectations, sending the stock up more than 1.2%. The bank’s annual profits also reached record levels at $36.4 billion. J.P. Morgan also had a surge in bond-trading revenues during the fourth quarter.
Citigroup’s earnings got a boost from strong fixed-income trading as well, with revenue from that business surged 49%. Shares of the banking giant gained 1.6%.
“Year over year that number looks great, but let’s not forget the fourth quarter of 2018 was miserable,” said JJ Kinahan, chief market strategist at TD Ameritrade. Still, “this was a good way to start the earnings season.”
Delta Air Lines also reported better-than-expected earnings, boosted by lower fuel costs and strong travel demand. The results sent Delta shares higher by 3.3%.
A trader works on the floor at the closing bell of the New York Stock Exchange, December 30, 2019.
Bryan R Smith | Reuters
Despite the strong results from J.P. Morgan, Citi and Delta, expectations for the corporate earnings season were low. S&P 500 profits were forecast to fall 2% in the fourth quarter on a year-over-year basis, according to FactSet.
“The market continues to be in an extreme overbought condition that indicates the recent gains could be temporarily given back, while the fundamental backdrop driven by our core thesis and EPS suggest buying any meaningful weakness,” Tony Dwyer, chief market strategist at Canaccord Genuity, said in a note.
The Dow gave up most of its gains, while the S&P 500 and Nasdaq erased theirs, on news U.S. tariffs targeting Chinese goods will stay on through the 2020 election even as both sides get ready to sign a “Phase One” trade deal.
China and the U.S. are scheduled to ink a phase one agreement Wednesday. The U.S. had also agreed to remove China from a list of currency manipulating countries as part of the deal. But according to the Bloomberg News report, both countries understand the U.S. will review and possibly trim existing levies no sooner than 10 months after the deal is signed. CNBC’s Kayla Tausche also learned through an administration source there is no agreement on a path towards lowering tariffs.
Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer later confirmed the news in a joint statement.
As part of the phase one deal, the U.S. said it would scrap a new round of tariffs and cutting existing duties on $120 billion in products to 7.5%. However, Trump said 25% tariffs on $250 billion in Chinese products would stay in place.
“These tariffs have now become a roach motel,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It was always my belief they would not come off until we got a phase two deal. We’re still stuck with these tariffs which are a drag on growth in trade and manufacturing.”
The report sparked a bid in U.S. Treasurys, pushing yields lower. The benchmark 10-year rate fell to trade at 1.81%, down more than 3 basis points. The 2-year yield slid to 1.56%.
In other corporate news, CNBC learned Amazon will let sellers us FedEx’s ground delivery services after a temporary ban from the e-commerce giant. This led FedEx shares to close higher by 1.8%.
—CNBC’s Silvia Amaro and Patti Domm contributed to this report.