KEY POINTS

  • JP Morgan and Citigroup both posted strong earnings.
  • Wells Fargo saw profits plunge over litigation costs
  • U.S. may not lower tariffs on Chinese goods until end of year

U.S. stocks finished mixed on Tuesday on volatile trading as doubts arose about tariffs on Chinese imports to the U.S. and on a mixed bag of big bank earnings.

The Dow Jones Industrial Average gained 31.81 points to 28,938.86 while the S&P 500 fell 5.16 points to 3,282.97 and the Nasdaq Composite Index dropped 22.6 points to 9,251.33.

Volume on the New York Stock Exchange totaled 2.95 billion shares with 1.595 issues advancing, 223 setting new highs, and 1,349 declining, with eight setting new lows.

Active movers were led by Bank of America Corp. (BAC), NIO Inc. (NIO) and Wells Fargo & Co. (WFC).

Chinese and U.S. trade officials are scheduled to sign a phase one trade deal in Washington on Wednesday. China will reportedly pledge to purchase $200 billion of U.S. goods over a two-year period.

However, there are renewed worries about the trade deal. Bloomberg reported the U.S. will review and possibly cut existing levies not for 10 months after the trade deal is signed (that is, after the U.S. presidential election). CNBC reported there is apparently no agreement on a clear path towards lowering tariffs. President Donald Trump himself said 25% tariffs on $250 billion in Chinese products will remain in place.

“These tariffs have now become a roach motel,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It was always my belief they would not come off until we got a phase two deal. We’re still stuck with these tariffs which are a drag on growth in trade and manufacturing.”

The core consumer price index, which does not include volatile food and energy sectors, edged up 0.1% in December from the prior month, the smallest such advance in three months, the Labor Department said Tuesday. The core CPI rose 2.3% from a year earlier.

J.P. Morgan Chase (JPM) posted fourth quarterly earnings and revenue that exceeded analyst expectations. The bank’s annual profit reached a record $36.4 billion. JPM shares rose 1.12%.

Citigroup (C) reported quarterly results that also beat analyst expectations, driven by a 49% surge in bond trading revenues. Citi shares jumped 1.55%. But Wells Fargo (WFC) saw its fourth-quarter profits plunge by more than 50% on low interest rates and litigation charges.

FactSet cautioned that S&P 500 fourth quarter profits were expected to fall 2% on a year-over-year basis.

“We’re seeing a mixed bag of results from big banks to start earnings season with JPM and Citi coming in very strong but Wells missing expectations,” wrote Mike Loewengart, vice president of investment strategy at E-Trade. “There is a lot to live up to this earnings season since [the third quarter] was so robust. That said, growth expectations for the beginning of 2020 are tepid at best. Inflation has been climbing slowly but steadily since September, but really it’s not enough to force the Fed’s hand for any action.”

In a speech in London, John Williams, president of the New York Federal Reserve Bank, said Wall Street needs to alter its culture.

“When we talk about company culture in the context of financial services, the first thing that comes to mind is the risky, unethical, and sometimes criminal behavior in the banking industry, particularly during the financial crisis,” Williams said. “And 10 years on from the crisis, this behavior persists. Instances of fraud, money laundering, and scandals related to foreign exchange and Libor continue to make the headlines.”

Overnight in Asia, markets finished mixed. China’s Shanghai Composite dropped 0.28%, while Hong Kong’s Hang Seng fell 0.24%, and Japan’s Nikkei-225 rose 0.73%.

In Europe markets were mixed, as Britain’s FTSE-100 gained 0.11%, France’s CAC-40 slipped 0.07% and Germany’s DAX fell 0.03%.

Crude oil futures rose 0.62% at $58.44 per barrel and Brent crude climbed 0.31% at $64.69. Gold futures dropped 0.2%.

The euro fell 0.04% at $1.1128 while the pound sterling edged up 0.25% at $1.3022.

The yield on the 10-year Treasury dropped 1.62% to 1.818% while yield on the 30-year Treasury slid 1.39% to 2.275%.