By Anna Hirtenstein and Gunjan Banerji
U.S. stocks turned higher Tuesday as investors parsed earnings results from the biggest banks for insights on the health of the American economy and its lenders.
The S&P 500 rose about 0.4% after wavering earlier in the session. The Dow Jones Industrial Average rose roughly 290 points, or 1.1%. The Nasdaq Composite fell roughly 0.2%.
A rally in the equity market on Monday fizzled after California rolled back some of its reopening plans, stoking fears about additional lockdowns.
Earnings season kicked off in earnest this week with the latest quarterly results from big banks. JPMorgan and Citigroup's earnings beat analysts' estimates, but the firms' results highlighted the extraordinary economic uncertainty ahead and a worrisome outlook on the health of their corporate and consumer clients. Both set aside billions of dollars for rising loan losses as they girded for defaults.
Shares of JPMorgan rose 0.7%, lifting the Dow, while Citigroup's slipped about 1.7%.
Wells Fargo's shares declined 4.2% after it reported a $2.4 billion loss and said it intends to cut its dividend next quarter.
"This shows that there's a three-speed recovery in the economy," said Sebastien Galy, a macro strategist at Nordea Asset Management. "Some banks will be better positioned than others" during times of volatility, particularly in the case of JPMorgan who is a key player in market-making.
Later this week, investors will be parsing earnings of Morgan Stanley, Bank of America and Goldman Sachs.
Overall, investors are expecting corporate earnings among companies in the S&P 500 to fall 45% in the second quarter from the year earlier, according to FactSet. Financials companies within the S&P 500 are expected to take an even bigger hit--a roughly 57% drop from the prior year.
Still, the stock market has been resilient despite the dour outlook, buoyed by optimism about an eventual recovery and stimulus from the Federal Reserve.
In government bond markets, the yield on U.S. 10-year Treasurys slipped to 0.605% Tuesday, from 0.638% Monday. Bond yields and prices move in opposite directions.
Data Tuesday showed consumer prices in the U.S. rose 0.6% in June, a little more than expected, according to data from the U.S. Bureau of Labor Statistics. The increase was largely driven by an uptick in gasoline and food prices.
In Europe, the pan-continental Stoxx Europe 600 slipped 0.8%. Industrial production in the eurozone is recovering slower than expected and is still more than 20% lower than last year, according to a Tuesday data release. A gauge of sentiment for institutional investors in July also came in below expectations.
Fresh data showed that the U.K's economic expansion in May was weaker than economists had expected, and output in Britain remains around a quarter below the level it had reached in February, before the pandemic struck and the economy was shut down.
"For the U.K., it's a tough gig currently. The drop in GDP was starker than on the continent and now the bounceback is weaker," said Peter Schaffrik, global macro strategist at RBC Capital Markets. "It's a pretty big miss."
In Asia, major benchmarks slipped after tensions between the U.S. and China rose, prompted by Secretary of State Mike Pompeo's comments on Monday that the Trump administration formally rejects a swath of Chinese claims in the South China Sea. China's main stocks gauge, the Shanghai Composite Index, declined 0.8%.
Write to Anna Hirtenstein at firstname.lastname@example.org and Gunjan Banerji at Gunjan.Banerji@wsj.com
Corrections & Amplifications
This article was corrected at 3:22 p.m. ET to reflect that the yield on the U.S. 10-year Treasury note declined Tuesday from 0.638% on Monday, not Wednesday.