By Chris Matthews and Barbara Kollmeyer, MarketWatch
Muted trading activity weighs on bank revenue
U.S. stocks were treading water at the start of trade Monday, as investors parse earnings from Goldman Sachs Group Inc., and Citigroup Inc., which could provide further guidance about the state of the banking sector and the broader economy.
How are benchmarks faring?
The Dow Jones Industrial Average edged 11 points lower to 26,404, a loss of less than 0.1%, while S&P 500 futures ticked less than a point higher 2,908. The Nasdaq Composite Index rose 8 points, or 0.1%, to 7,991.
On Friday (http://www.marketwatch.com/story/dow-set-for-triple-digit-gain-as-china-trade-data-buoys-stock-market-amid-bank-earnings-2019-04-12), the Dow gained 269.25 points, or 1%, to end at 26,412.30, while the S&P 500 index rose 19.09 points, or 0.7%, to finish at 2,907.41. The Nasdaq Composite Index advanced 36.80 points, or 0.5%, to close at 7,984.16.
The S&P and Nasdaq closed higher for the week, while the Dow logged a slight loss.
What's driving the market?
Earnings season comes into fuller swing, though the week will be shortened by the Easter holiday (http://www.marketwatch.com/story/which-markets-are-closed-on-good-friday-2019-04-15), with results Monday from Goldman(GS) and Citigroup(C).
Both banks showed sharp declines in earnings compared with the first-quarter of last year, but were able to surpass analysts low expectations for quarterly profits. On the revenue front, Goldman fell short of expectations while Citigroup matched, underscoring muted trading and mergers-and-acquisition activity on Wall Street in the first quarter.
Investors were cheered by quarterly results from Dow component JPMorgan Chase & Co., which kicked off a new earnings season early Friday, that came in better than expected (http://www.marketwatch.com/story/jp-morgan-chases-stock-surges-after-profit-revenue-rise-above-expectations-2019-04-12), while Wells Fargo & Co. also posted robust revenue and in-line earnings.
Analysts expect first-quarter earnings numbers for the S&P 500 to suffer the first year-over-year decline in nearly three years (http://www.marketwatch.com/story/risk-of-an-earnings-recession-rises-as-sp-500-profits-to-fall-for-first-time-in-3-years-2019-04-11), as macroeconomic headwinds continue to pull down estimates from analysts.
On Saturday, global financial policy makers meeting for the International Monetary Fund, said they stood ready to "promptly shore up growth" if needed (http://www.marketwatch.com/story/global-policy-makers-say-theyre-willing-to-shore-up-growth-to-avoid-world-slowdown-2019-04-13). While risk forecasts for economic expansion in 2020, remain tilted to the downside, amid concerns centered on trade tensions, policy uncertainty and geopolitical developments.
On the trade front, U.S. Treasury Secretary Steven Mnuchin told reporters over the weekend that the U.S. and China were moving closer to an agreement on trade, with phone discussions between the two countries last week. But he wasn't sure if more face-to-face meetings would be needed. On Sunday, Reuters reported that the U.S. was watering down demands (https://www.reuters.com/article/us-usa-trade-china-exclusive/exclusive-u-s-waters-down-demand-china-ax-subsidies-in-push-for-trade-deal-sources-idUSKCN1RR02X)that China cut down on industrial subsidies as a condition for a trade deal, after encountering strong Chinese opposition.
Federal Reserve policy could also be on traders' minds, after President Trump renewed his attacks (http://www.marketwatch.com/story/donald-trump-the-stock-market-should-be-as-much-as-10000-points-higher-2019-04-14) on the central bank Sunday. He criticized rate increases enacted during the first two years of his administration, as well as the bank's balance sheet reduction program, called qualitative tightening, which is set to end in September.
Federal Reserve Chairman Jerome Powell has repeatedly asserted (http://www.marketwatch.com/story/powell-downplays-recession-fears-in-2019-03-10) the central bank's independence from political influence, while pledging to serve our his four-year term, ending in early 2021.
What stocks are in focus?
Shares of Advanced Disposal Services Inc.(ADSW) Waste Management Inc. surged 19.7% after Waste Management Inc.(WM) said it entered into an agreement to buy the rival waste company in a $4.9 billion deal. Waste Management will pay $33.15 a share in cash for Advanced Disposal stock, a 22.1% premium to its Friday closing price.
Shares of Canadian legal cannabis maker Aphria Inc.(APHA.T) slumped 13% early Monday, after the Canada-based cannabis company swung to a wide third-quarter loss (http://www.marketwatch.com/story/aphrias-stock-tumbles-after-swinging-to-wide-loss-while-revenue-increases-2019-04-15) in the most recent quarter.
Dow component Goldman Sachs' stock fell 1.9%, after the bank reported first-quarter earnings (http://www.marketwatch.com/story/goldmans-stock-gains-as-big-profit-beat-helps-offset-revenue-miss-2019-04-15) that were well above expectations, but revenue figures that fell short, calling into question the bank's ability to diversity its revenue away from its traditional investment banking business. The stock's performance was a major headwind (http://www.marketwatch.com/story/goldmans-stock-fall-to-chop-about-26-points-off-the-dows-price-2019-04-15) for the Dow Monday.
Shares of Citigroup rose 0.5% Monday morning (http://www.marketwatch.com/story/citigroup-posts-revenue-decline-in-first-quarter-as-profit-tops-estimates-2019-04-15), after the bank surpassed earnings expectations for the first quarter, while reporting a decline in revenue that was in line with analysts' forecasts.
What are the analysts saying?
"Despite an ambitious strategy to diversify the bank's revenue streams from its core investment banking activities--such as the launch of Marcus, its online banking service--Goldman's revenue structure remains quite static, with trading activities still accounting for 41% of the bank's revenue, while investment management, with strategic growth opportunities, only accounts for 17%, mirroring last year's results," wrote Axel Pierron, managing director of capital markets management consultancy Opimas, in an email.
"Expectations of a U.S./China trade deal continue to rise, with some anticipating an announcement this week...But, as a reminder, the market has already priced in a deal, so the real focus of any announcement will be when tariffs are removed, and the sooner, the better," wrote Tom Essaye, president of the Sevens Report, wrote in a Monday morning note to clients.
What economic data and Fed speakers are ahead?
Factory production in New York state picked up in April versus March (http://www.marketwatch.com/story/empire-state-manufacturing-index-rebounds-in-april-but-growth-still-fairly-subdued-2019-04-15), with the Empire State business conditions index rising from a reading of 10.1 from the previous months' two-year low of 3.7.
Chicago Fed President Charles Evans told CNBC Monday morning (https://www.cnbc.com/2019/04/15/feds-charles-evans-tells-cnbc-rates-can-stay-unchanged-into-fall-of-2020.html)"I can see the funds rate being flat and unchanged into the fall of 2020. For me, that's to help support the inflation outlook and make sure it's sustainable."
Evans will give a speech at the New York Association of Business Economists at 1 p.m. He is a voter on the Fed's interest-rate setting committee.
At 8 p.m. Boston Fed President Eric Rosengren, also a voter, was set to give a speech at Davidson College in Davidson, N.C.
How are other markets trading?
Stock markets in Asia closed on a mixed note Monday (http://www.marketwatch.com/story/asian-markets-race-to-gains-on-renewed-trade-deal-hopes-2019-04-14), with Shanghai's Composite index and Hong Kong's Hang Seng Index each losing 0.3% on the day. Japan's Nikkei 225 , meanwhile, rose 1.4%. European markets were trading slightly higher (http://www.marketwatch.com/story/europe-stocks-edge-higher-supported-by-banks-2019-04-15), with the Stoxx Europe 600 up 0.1%.
In commodities markets, crude oil futures (http://www.marketwatch.com/story/oil-retreats-from-5-month-high-as-russian-official-talks-of-potential-bid-for-greater-crude-share-2019-04-15) fell 0.7%, while the price of gold (http://www.marketwatch.com/story/gold-edges-lower-as-investors-turn-away-from-haven-assets-2019-04-15) and the U.S. dollar were each lower Monday.
(END) Dow Jones Newswires
April 15, 2019 09:42 ET (13:42 GMT)
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