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U.S. Stocks Waver as Banks Kick Off Earnings Season

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07/14/2020 | 02:15pm EDT

By Anna Hirtenstein and Gunjan Banerji

U.S. stocks wavered 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 0.1% shortly after the opening bell. The Dow Jones Industrial Average rose about 210 points, or 0.8%. The Nasdaq Composite fell about 0.6%. 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 Chase rose 0.9%, pushing the Dow higher, while Citigroup's slipped about 1.7%.

Wells Fargo's shares declined 6% 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.

Meanwhile, shares of technology heavyweights that have pushed the market higher in recent months were some of the hardest hit on Tuesday. Netflix lost 3.4%, while Amazon.com shed 1.5%.

The moves Tuesday continue a wild ride for the sector. The tech-heavy Nasdaq climbed almost 2% in trading Monday only to end the day 2.1% lower, snapping a three-session winning streak.

In government bond markets, the yield on U.S. 10-year Treasurys slipped to 0.609% 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 1.1%. 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. The British pound edged down 0.3% against the dollar.

"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 anna.hirtenstein@wsj.com 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.

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION 0.46% 26.47 Delayed Quote.-24.84%
DJ INDUSTRIAL 0.12% 27931.02 Delayed Quote.-2.13%
EURO / BRITISH POUND (EUR/GBP) 0.06% 0.9044 Delayed Quote.6.92%
JPMORGAN CHASE & CO. 0.04% 102.41 Delayed Quote.-26.54%
MORGAN STANLEY 0.23% 52.3 Delayed Quote.2.31%
NASDAQ 100 -0.12% 11164.446946 Delayed Quote.27.84%
NASDAQ COMP. -0.21% 11019.300969 Delayed Quote.22.81%
NETFLIX, INC. 0.28% 482.68 Delayed Quote.49.17%
NORDEA BANK ABP. -0.78% 69.79 Delayed Quote.-7.73%
S&P 500 -0.02% 3372.85 Delayed Quote.4.42%
S&P/CITIC 300 INDEX 0.02% 4086.93 Delayed Quote.15.04%
S&P/CITIC 50 INDEX 0.02% 3969.33 Delayed Quote.6.22%
STOXX EUROPE 600 -1.20% 368.07 Delayed Quote.-11.49%
STOXX EUROPE 600 NR -1.19% 808.05 Delayed Quote.-9.96%
THE GOLDMAN SACHS GROUP, INC. -0.20% 207.97 Delayed Quote.-9.37%
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