Stocks Turn Higher at Start of Earnings Season

The Dow Jones Industrial Average edged higher Tuesday as big banks kicked off fourth-quarter earnings season with mostly strong results.

The blue-chip index ticked up 0.2%, while S&P 500 and the technology-heavy Nasdaq Composite wavered between small gains and losses.

Financial stocks were among the best performers in the S&P 500, rising 0.4%, after JPMorgan Chase and Citigroup reported strong results.

Companies in the S&P 500 are expected to report a fourth-quarter earnings decline of 2.4% from the year earlier, according to Factset. That would mark the fourth consecutive quarter of lower earnings, the longest such stretch since a period from 2015 to 2016.

The equity market’s recent gains have come as corporate earnings growth in the U.S. has slowed sharply, said Ben May, the director of global macro research at Oxford Economics, resulting in stretched valuations. So while the fourth-quarter numbers are important, more critical will be what executives say about the rest of 2020.

“It perhaps creates more downside risks if the economy underperforms or earnings don’t improve to the extent expected,” he said.

Banks got off to a mostly strong start to earnings season, though. Dow component JPMorgan and rival Citigroup reported strength in their investment banks in the last three months of 2019. JPMorgan rose 1.6%, Citi 2.2%. Those gains helped push the Nasdaq KBW Bank index up 0.5%.

But Wells Fargo fell 4.8% after reporting its profit sank due to legal costs incurred from problems in its sales practices.

Stocks lost some of their momentum in afternoon trading following a Bloomberg report that U.S. tariffs are likely to stay in place until after the election.

Still, the moves weren’t significant in either direction, said Frank Cappelleri, the executive director of brokerage Instinet.

In fact, he said, equities have been unusually calm since about mid-October, and that itself is the more important trend to watch. “That type of market calm can’t last forever,” he said. “It’s just a matter or when and what’s going to cause it.” Like others, he was looking to the coming earnings season for catalysts.

In other corporate news, Delta Air Lines rose 3.3% after the airline said lower fuel prices and strong demand over the holidays helped boost its profit, which exceeded analysts’ expectations. Meanwhile, Boston Scientific fell 6.3% after the medical-devices maker warned its sales would fall shy of expectations.

Also, Visa rose 0.3% after it agreed to buy fintech firm Plaid for $5.3 billion.

Overseas, the Shanghai Composite Index closed for the day down 0.3%, while the pan-continental Stoxx Europe 600 index edged up 0.3%.

Exports from China climbed by 0.5% last year, a sharp comedown from 2018’s expansion of nearly 10%, according to data released Tuesday. Imports dropped 2.8% last year.

While the slowdown comes amid a two-year trade war between the world’s largest economies, China’s foreign trade revived in December as tensions ebbed following signals that Washington was nearing a trade deal with Beijing. Investors in recent days have been cautiously optimistic about that accord as they await more information on the specific terms of the agreement.

Exports from China climbed by 0.5% last year, a sharp comedown from 2018’s expansion of nearly 10%, according to data released Tuesday. Photo: /Associated Press

China has committed to buying almost $80 billion of additional manufactured goods from the U.S. over the next two years, Reuters reported on Tuesday. The Asian giant would also purchase more than $50 billion more in energy supplies, and boost spending on U.S. services by roughly $35 billion, the news agency said, citing a person with knowledge of the matter.

“The overall mood music is positive, but the key thing is what the actual wording of the agreement is,” said Edward Park, deputy chief investment officer in London for Brooks Macdonald Asset Management. “Investors need to see real progress on U.S.-China.”

Separately, China’s currency strengthened to its strongest level since July in offshore trading after the U.S. on Monday dropped it from a list of currency manipulators, days before the likely signing of a phase-one trade deal. The yuan pared back its gains later in the day.

Write to Anna Isaac at anna.isaac@wsj.com and Paul Vigna at paul.vigna@wsj.com

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