What’s moving markets today: January 15, 2020

US stocks ended in the green on Wednesday, with the Dow eking out a fresh record finish and closing above 29,000 points for the first time in history. The index ended up 0.3%, or 91 points.

Stocks were up Wednesday amid the signing of the US-China “phase one” trade deal and earnings season getting under way.

The S&P 500 also closed at a record high, rising 0.2%

The Nasdaq Composite finished up 0.1%.

With the US-China “phase one” trade deal being signed, what’s the next catalyst for stocks?

As investors are watching the trade war coming to an end, and awaiting the USMCA deal getting signed into law, hopes for 2020 are more optimistic.

“The market is creeping its way higher as it awaits increases in earnings estimates,” said Sam Stovall, US equity strategist at CFRA Research, on the CNN Business digital live show Markets Now.

Besides earnings expectations, investors will also turn their attention to the possibility of another tax cut, Stovall said.

As stocks look for further gains in 2020, investors are keeping an eye on the presidential race. According to Stovall’s research, if the S&P 500 rises between July 31 and October 31 in an election year, the incumbent candidate wins 80% of the time. If stocks fall, the incumbent loses 88% of the time. “Investors don’t like uncertainty, and a new regime injects uncertainty,” he said. 

Aside from the election, “the major headwind for 2020 is the possibility that inflation starts to pick up as the economy improves, as unemployment remains really low,” Stovall said.

That said, this week’s inflation data, which was on the lower side, has assuaged these worries for now.

Earnings seasons kicked off with banks this week, as JPMorgan (JPM), Citi (C), Bank of America (BAC) and Goldman Sachs (GS) reported results.

Overall, earnings were better than expected, but 2020 could be a turning point.

“I think this is a watershed year for the banks,” said Dick Bove, chief financial strategist at Odeon Capital, on CNN Business’ Markets Now show. “For the last 10 years, banks have benefited from a whole series of events that are not there anymore.”

Interest rates are lower, which is weighing on profits across the board. Further tax cuts are also unlikely, and the companies can’t buy back shares at the rate they have done in the past to bolster their share prices, Bove said.

That’s why consumer banks are pushing into regional markets, “and as a result regional banks are consolidating to protect their market share,” he said.

Headwinds for the industry go beyond competing on the consumer banking level. Managed investing has competition from the world of ETFs, pricing in trading is going down, and investment banking activity is dwindling beyond the biggest players.

Stocks are climbing higher on Wednesday, as the United States and China are signing their “phase one” trade agreement in Washington. But the market’s move isn’t all about trade.

“This isn’t a huge explosive headline that is making our markets move tremendously, this was already baked in,” Jonathan Corpina, senior managing partner at Meridian Equity Partners, told Zain Asher on the CNN Business digital live show Markets Now.

Rather it’s just one of the positive headlines of the day amid earnings season kicking off. Banks, which are usually first in reporting earnings and are thought of as a bellwether for the season, mostly fared better than expected.

Investors shrugged off some initial jitters Wednesday and got back to buying stocks ahead of the ceremonial signing of a phase one trade deal between the United States and China in Washington.

The Dow, which dropped nearly 40 points after the opening bell, was trading 165 points higher by late morning. That pushed the Dow above the 29,100 level – and to a new intraday all-time high to boot.

Strong earnings from insurer UnitedHealth (UNH) helped lead the Dow higher. UNH shares were up more than 2%. The stock is the third-largest weighting in the Dow, trailing only Boeing (BA) and Apple (AAPL).

The S&P 500 and Nasdaq rallied as well. Both were also not far from record highs.

The market opened mixed Wednesday as investors wait for the United States and China to sign the “phase one” trade deal at the White House.

Shares of Target (TGT) plunged 5% after the company reported that holiday sales were below forecasts. Walmart’s (WMT) stock also fell. Bank of America (BAC) and Goldman Sachs (GS) were both down more than 2% after reporting their latest earnings.

A trio of major Wall Street companies reported their latest results Wednesday and it was a mixed bag.

Bank of America (BAC) topped revenue and earnings forecasts. BofA got a boost from consumer lending and bond trading – much like JPMorgan Chase (JPM) and Citigroup (C) did in their most recent results Tuesday. Shares of BofA were down slightly though.

Investment banking giant Goldman Sachs (GS) also got from fixed income trading and IPO underwriting fees. That helped its overall revenue to top forecasts. But the so-called Vampire Squid missed consensus earnings estimates because of a slowdown in mergers as well as higher legal expenses. The stock fell about 1.5%.

Asset manager BlackRock (BLK) impressed investors with better than expected earnings and revenue. The strong results were led by increased inflows into the company’s popular iShares index ETFs. BlackRock’s results came one day after CEO Larry Fink said the company would shift its investment strategy to focus more on climate change and sustainability.

Target reported a sales gain of only 1.4% in November and December at stores open at least a year.

That was below the company’s guidance for the period and well short of the 5.7% growth it had a year earlier.

While the company said it should still be able to hit its profit target for the fiscal fourth quarter, the sales report sent shares of Target (TGT) down 9% in premarket trading.

Read more here.

The ongoing strength of the American consumer is reassuring investors.

JPMorgan Chase (JPM) generated solid gains in deposits and an increase in revenue from auto loans and other consumer products. It also helps that banks have a clearer picture on interest rates moving forward.

UBS on Wednesday said it had raised its expectations for US earnings growth this year. The Swiss bank thinks results will better reflect the strength of the American economy following a relative disconnect in 2019, pushing stocks higher.

“We see the upcoming reporting season marking a turning point after a period of weak profit growth for US companies,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

President Donald Trump on Wednesday is expected to sign a preliminary trade deal with senior Chinese leaders — but the document in question is still under wraps.

The public absence of the text, estimated to be more than 80 pages long, opens up the door to a “knee-jerk” response by markets “if the final details from the signed deal underwhelm investors,” Han Tan, market analyst at FXTM, a currency broker, told clients Wednesday. Optimism, Tan noted, is “largely priced in.”

What we have: US and Chinese officials have repeatedly described the agreement in sweeping terms, citing promises by Beijing to go beyond prior commitments made on intellectual property theft and forcing US companies to hand over their technology, as well as a pledge from China to buy $200 billion in farm goods and other products made by the US over a two-year period.

The missing details of the deal have left a host of questions: Exactly what commitments did China make? How will the deal be enforced? When will it take effect? Will China change its laws? And how will either country determine if the other failed to comply with the terms?

The latest: Bloomberg reports that existing US tariffs on billions of dollars worth of Chinese imports are likely to stay in place until after the American presidential election. But Treasury Secretary Steven Mnuchin is pushing back on this, telling reporters that Trump will reassess after securing a “phase two” agreement.

What is clear: Despite an apparent truce, the fight between United States and China isn’t over yet.