U.S. stocks rose Wednesday morning, as investors digested mostly positive earnings from financial institutions like Bank of America and Goldman Sachs.
Meanwhile, Wall Street continues to battle uncertainty driven by a partial government shutdown entering its 26th day and drama in the U.K. related to its tumultuous attempts at negotiating an orderly divorce from the European Union.
How are major benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.49% rose 147 points, or 0.6%, to 24,212, while the S&P 500 index SPX, +0.23% climbed 9 points, or 0.4%, to 2,623. The Nasdaq Composite Index NQH9, +0.17% advanced 28 points to 7,052, a gain of 0.4%.
What’s driving the market?
Wall Street investors are cheering fourth-quarter results from Bank of America Corp. BAC, +7.41% which reflected healthy demand for loans even as interest rates rose, while also taking solace in quarterly results from Goldman Sachs Group Inc. GS, +8.01% which produced earnings and profits that topped expectations on the back of healthy mergers and acquisitions.
In the early innings of fourth-quarter earnings season, management guidance has communicated their confidence in domestic expansion, if not in global economic growth, which has been showing cracks. That trend continued Wednesday, after Bank of America Chief Executive Brian Moynihan said in a statement accompanying the earnings release that “we see a healthy consumer and business climate driving a solid economy.”
Traders are also taking solace in a move by the People’s Bank of China to inject a record $83 billion into the country’s financial system Wednesday, as the government tries to blunt the economic slowdown that threatens to damage the European and U.S. economies as well.
Also in focus on Wednesday was a U.K. parliamentary vote of no confidence in Prime Minister Theresa May’s government, set to take place at around 2 p.m. Eastern Time, after the British leader suffered an overwhelming rejection of her proposed Brexit deal late Tuesday. The defeat, 432 against compared with 202 in favor, was the largest margin of defeat by a sitting British government since the 1920s, and throws into doubt the country’s plans to exit from the EU without disrupting global markets. May is expected to survive the late-Wednesday vote.
Investors will also continue to weigh the implications of a protracted, partial government shutdown, which has now stretched to a record 26th day. While markets have largely shrugged off the drama unfolding in Washington, economists warn that the longer the impasse lasts, the greater the effect on the economy will be, with Trump administration economists now estimating that gross domestic product in the first quarter will be reduced by 0.1% each week the shutdown drags on.
Which stocks are in focus?
B. of A. reported revenue and profit that were better than average analysts’ estimates from FactSet. The bank reported earnings per share, or EPS, of 70 cents, compared with consensus for 63 cents. The stock is up 7.3% Wednesday.
Sears Holdings Corp. SHLDQ, +47.47% shares are in focus, after Chairman Eddie Lampert prevailed in a bankruptcy auction for the struggling department store chain with an improved takeover bid of roughly $5.2 billion, according to reports. The stock is up 40% early Wednesday.
Ford Motor Co. F, -5.43% said it expects adjusted earnings per share of $1.30, compared with FactSet consensus of $1.33 a share. Shares are down 3.4% at the start of trade Wednesday.
BlackRock Inc. BLK, +4.28% reported quarterly results that were weaker than expected, with revenue totaling $3.434 billion in the fourth quarter, while analysts polled by Refinitiv expected sales to reach $3.516 billion. Nevertheless, the stock is up 4.3%.
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Shares of Fiserv Inc. FISV, -4.69% were down 6% Wednesday, after the company announced a deal to acquire First Data Corp. FDC, +20.13% in an all-stock deal worth $22 billion. First Data stock is up 18.4%.
Shares of Goldman were up 7.8% Wednesday.
Nordstrom Inc. JWN, -6.60% stock was down 6.5% after the retailer said Tuesday evening that its full-year fiscal 2019 earnings would be at the low end of its previous guidance, citing weak holiday sales.
Shares Charles Schwab Corp. SCHW, +5.12% are up 5.3% Wednesday, after the brokerage beat Wall Street estimates for earning and revenue in the fourth quarter.
What are the strategists saying?
“The market is where it should be,” Bob Doll, senior equity strategist and portfolio manager at Nuveen, told MarketWatch. “Earnings so far have been mixed, but skewing positive,” he said, adding that management commentary has been “fairly optimistic so far.”
But with a target for the S&P 500 at years end of between 2650 to 2750, “the easy money is in the rearview mirror,” he said, predicting that even if a strong fourth-quarter earnings season pushes stock prices beyond those levels in the near-term, the medium-term risks to the economy from slowing growth abroad, rising rates, and dysfunction in Washington will soon usher in the return of elevated volatility.
Mark Newton, independent market analyst at Newton Advisors, on Wednesday wrote that the “S&P [is] likely to face strong overhead resistance between 2630-40 between Wednesday-Friday of this week. Reversals of trend look likely technically, and one should consider using strength Wednesday to flatten out and/or adopt hedges for an above-average chance of a drawdown into next week.”
What data are in focus?
The cost of imported goods fell for the second month in a row, declining by 1% in December, the Labor Department reported Wednesday morning.
Home-builder confidence rebounded from a three year low in January, as the National Association of Home Builders index rose to 58, beating economists expectations of 57, according to an Econoday survey.
At 2 p.m., the Federal Reserve will release its beige book, featuring anecdotal information on current economic conditions in the U.S.
How are other markets trading?
In Asia, markets traded mixed, after disappointing data on machinery orders helped send the NIK, -0.55% 0.6% lower. In Hong Kong, the Hang Seng Index HSI, +0.27% rose 0.3%, while China’s Shanghai Composite Index SHCOMP, +0.00% traded flat.
European markets traded mostly higher Wednesday, with the Stoxx Europe 600 SXXP, +0.54% rising 0.5%, while the U.K’s FTSE 100 UKX, -0.47% fell 0.5%.
Crude oil CLG9, -0.63% prices were on the retreat Wednesday morning, down 0.6% to $51.82 per barrel, while the price of gold GCG9, +0.49% rose and the U.S. dollar DXY, +0.04% was virtually unchanged.
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