Friday 5 June, 2020

US stocks edge lower as earnings season takes off

US indexes were mostly lower in morning trading Friday as gains for companies in the energy, health care and utility industries were offset by losses in bank stocks.

The S&P 500 is still on pace to close out its best week in a month and a half. Worries about global trade, which have dominated markets for weeks, eased a bit after President Donald Trump asked trade officials to consider the possibility of returning to talks on a free-trade agreement for countries around the Pacific.

Analysts expect the market to shift its attention to corporate profits, which are thought to be growing at their fastest rate in years. JPMorgan Chase and other big banks on Friday reported higher earnings growth than expected for the first three months of the year, with most of the rest of the companies in the S&P 500 slated to issue their own reports in the coming weeks. PNC Financial fell after its results missed forecasts.

KEEPING SCORE: The S&P 500 fell 4 points, or 0.2 percent, to 2,659 as of 10:37 a.m. Eastern time. It's on pace for a 2.1 percent gain this week, its best since early March.

The Dow Jones industrial average fell 60, or 0.2 percent, to 24,419, and the Nasdaq composite fell 27, or 0.4 percent, to 7,113.

EARNINGS POWER: Markets have been volatile in recent weeks as investors weigh how seriously to take the threat of a possible trade war. But those concerns relate to how much corporate profits would be affected in the future by restrictions on trade. At present, earnings are surging.

JPMorgan Chase on Friday morning said that its profit jumped 35 percent from a year earlier. Most of the gains came from higher interest rates, which mean banks are charging more for loans, and a lower tax bill following Washington's recent overhaul of the tax code.

Across the S&P 500, analysts came into this earnings season expecting companies to report a 17 percent jump in profits per share. That would be the strongest growth in seven years, and analysts say it could wrest the market's attention back to what they say are healthy underlying fundamentals. Over the long term, stock prices tend to track the ups and downs of corporate earnings.

BANK PAIN: Even though they reported higher profits than analysts expected, JPMorgan Chase and other big banks saw their stock prices fall. JPMorgan Chase sank 1.2 percent to $111.96, Wells Fargo lost 2.5 percent to $51.37, and Citigroup lost 1.5 percent to $71.08. PNC fell 3.5 percent to $146.32, the biggest drop in the S&P 500.

BROAD SUPPORT: Broadcom rose to one of the biggest gains in the S&P 500 after it said it will repurchase up to $12 billion of its stock. By taking shares off the market, such buybacks can result in higher earnings per share for companies. The technology company rose 3.3 percent to $247.26.

COMMODITIES: Benchmark U.S. crude oil added 40 cents to $67.47 per barrel. Brent crude, the international standard, rose 48 cents to $72.50.

Gold rose $5.60 to $1,347.60, silver added 17 cents to $16.64 and copper rose a penny to $3.07 per pound.

YIELDS: The yield on the 10-year Treasury note slipped to 2.82 percent from 2.84 percent late Thursday. The two-year yield edged up to 2.36 percent from 2.35 percent, and the 30-year yield ticked fell to 3.02 percent from 3.05 percent.

CURRENCIES: The dollar rose to 107.50 Japanese yen from 107.23 yen late Thursday. The euro slipped to $1.2328 from $1.2329, and the British pound rose to $1.4256 from $1.4225.

MARKETS ABROAD: In Europe, France's CAC 40 rose 0.2 percent, and Germany's DAX gained 0.4 percent. The FTSE 100 in London was virtually flat.

Japan's Nikkei 225 rose 0.6 percent, South Korea's Kospi advanced 0.5 percent and Hong Kong's Hang Seng index edged down 0.1 percent.

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