Stocks extended their win streak to three days Thursday after The Wall Street Journal reported that the Trump administration was debating whether to ease tariffs on Chinese imports in a bid to calm markets and ease tensions with Beijing.
How did the benchmarks fare?
The Dow Jones Industrial Average DJIA, +0.67% erased an earlier loss to rise 162.94 points, or 0.7%, to 24,370.10 in choppy trade. The blue-chip gauge was up 267 points at its session high. The S&P 500 index SPX, +0.76% added 19.86 points, or 0.8%, to 2,635.96 and the Nasdaq Composite Index NQH9, +0.26% gained 49.77 points, or 0.7%, to finish at 7,084.46.
What drove the market?
U.S. officials are considering lifting some tariffs on Chinese products in an effort to elicit more concessions from China for a bilateral trade deal and to stabilize the financial markets, the Journal reported.
However, the plan faces resistance from U.S. Trade Representative Robert Lighthizer who doesn’t want the U.S. to come across as weak, the report said. A Treasury spokesman said that neither Treasury Secretary Steven Mnuchin nor Lighthizer “have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China.”
Aside from trade, investors focused on banking industry performance after Morgan Stanley announced earnings and revenue that fell short of analyst expectations. Chief Executive Officer James Gorman reassured investors, however, that, “We do not believe the fourth quarter is the new normal,” while adding that the bank’s performance in the first quarter of 2019 has already begun to rebound.
Morgan Stanley’s underwhelming results follow a warning by French bankSociété Générale GLE, -5.66% that its fourth-quarter revenue would fall roughly 20% due to the challenging environment in global capital markets.
The market’s upside was capped in early action by news late Wednesday that federal prosecutors have launched a criminal investigation into China’s Huawei Technologies Co. for allegedly stealing trade secrets from American corporations it does business with. The development raised fears that broader tensions between the U.S. and China would prevent a trade deal to stave off the Trump administration’s planned increase in tariffs on a range of imports from 10% to 25%, scheduled for March 1.
Meanwhile, investors were increasingly worried that a government shutdown, entering its 27th day, would deliver a more lasting impact to economic growth in the first quarter.
Separately, investors awaited the next steps for the U.K. after Theresa May’s government narrowly survived a no-confidence vote as she attempts to forge a path forward for the country’s exit from the European Union.
On the economic front, the number of Americans newly applying for unemployment benefits fell in the week ending Jan. 12, to 213,000 from 216,000 the week prior. Economists polled by MarketWatch had expected a reading of 220,000.
The Federal Reserve Bank of Philadelphia’s manufacturing index rose to 17.0 in January, up from 9.1 in December, the bank reported Thursday. The index reflects the health of the manufacturing sector in Pennsylvania, Delaware and New Jersey.
What were strategists saying?
“There are so many earnings reports yet to come, and that’s why you’re not seeing more movement in the markets today,” Tom Martin, senior portfolio manager at Globalt Investments told MarketWatch.
Investors remained focused on bank earnings this week, and what the numbers and management commentary say about the broader U.S. economy, Tom Essaye, president of the Sevens Report said in a note to clients. Commentary from banks executives has been “better than feared,” he wrote.
“The numbers themselves are OK, but not great, while the commentary is reassuring, but not overtly optimistic,” Essaye argued. “Given very low expectations [for the financial sector] heading into this earnings season, the better-than-feared result is helping markets rally, but it’s not enough to cause a material move higher in stocks through what we think is the higher end of the current range (2720ish).”
Which stocks were in focus?
Shares of Morgan Stanley MS, -4.41% fell 4.4% following release of quarterly results.
Signet Jewelers Ltd. SIG, -24.67% dropped 25% after the retailer cut guidance for its fourth quarter and fiscal 2019 and said its holiday performance fell short of expectations.
Amazon.com Inc. AMZN, +0.56% rose 0.6% after Consumer Intelligence Research Partners Inc. said that Amazon Prime membership has reached 101 million members.
Shares of PPP Industries Inc. PPG, +4.70% gained 4.7% after the company issued a downbeat outlook.
Blue Apron Holdings Inc. APRN, -10.49% shares skidded 11% after the meal-kit company was included in a list of 10 potential bankruptcies in 2019 by Investor Place.
How were other markets trading?
Markets in Asia traded lower, with Japan’s Nikkei NIK, +1.29% China’s Shanghai Composite Index SHCOMP, +0.79% and Hong Kong’s Hang Seng HSI, +0.96% all losing ground.
In Europe, markets ended mostly lower, with the FTSE 100 UKX, -0.40% down 0.4%.
Crude oil CLG9, +1.02% retreated, while gold GCG9, -0.05% settled lower and the U.S. dollar DXY, +0.00% was mostly unchanged.