U.S. stocks climbed as major financial institutions posted strong quarterly results. Investors also digested the latest updates in the U.K.’s Brexit deal proceedings and the People’s Bank of China’s recent injection of stimulus into the country’s economy.
Brexit remains in focus Wednesday after May suffered a massive defeat on her EU divorce deal Tuesday. The deal, struck down in a 432 to 202 vote, prompted a no-confidence motion from the opposition Labour Party and assertions from the EU’s chief Brexit negotiator that the bloc would be willing to re-open talks regarding its future relationship with the UK. May’s defeat also means the Bank of England will likely delay its next interest rate hike until the future path for Brexit is more clearly understood.
May’s government survived a vote of no confidence that began around 2 p.m. ET. Markets had priced in the outcome that the current government would be safe, as reflected in the pound’s overnight rebound. May must pick from a host of potential paths forward, including returning to the EU to try and work out a more popular deal, requesting an extension on the current March 29 deadline to leave the EU or having the U.K. departing without a plan. The potentially disastrous “no-deal” departure is among the most concerning to businesses, which have begun to stock up on goods ahead of anticipated political dysfunction.
Elsewhere, Asian equities got a boost after China’s central bank on Wednesday injected $83 billion into the country’s financial system in a move to add stimulus to the cooling, trade war-battered economy. This comes the day after the People’s Bank of China said it planned to cut taxes, increase spending and provide other measures intended to support the economy.
In the U.S., corporate earnings season is accelerating, with a slew of financial institutions reporting quarterly results on Wednesday. Bank of America (BAC) beat Wall Street’s expectations on the top and bottom lines and tripled its quarterly profit to $7.3 billion on strength in its consumer-banking business. Goldman Sachs (GS) exceeded profit expectations due in large part better-than-anticipated performance in its investment banking division.
Both Bank of America and Goldman Sachs, however, reported softer-than-expected fixed-income trading revenues. This had also been the case for Citigroup (C) and JPMorgan Chase (JPM), as financial institutions broadly suffered from investors staying on the sidelines during fourth-quarter market volatility. But growing net interest income – which is tied to loan growth – and stronger net interest margins across the reporting firms signal strength in the institutions’ core banking business, reflecting positively for a financial sector that had lagged in 2018. The S&P 500 Financial sector fell about 14% in 2018, dropping further than the S&P 500’s 6.2% decline.
ECONOMY: Import prices declined 1% in December, driven by lower fuel prices
Import prices declined less-than-expected in December, dropping 1% versus consensus expectations of a 1.3% decline. November’s import prices were downwardly revised by 30 basis points to register a 1.9% decline. The Bureau of Labor Statistics noted that lower fuel prices drove December’s decline, with import fuel declining 9.2% in December after a 13.3% drop the month prior. Petroleum prices declined 11.6%. All imports excluding fuel reflected no change in December, following a decline of 0.3% in November.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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