Stocks rose on Wednesday ahead of the U.S. and China signing a so-called phase one trade deal while the corporate earnings season picked up steam.
The Dow Jones Industrial Average traded 160 points higher, or 0.6% to reach an all-time high. The S&P 500 gained 0.4% and also hit a record, while the Nasdaq Composite advanced 0.5%.
Also helping sentiment Wednesday morning were comments from White House economic advisor Larry Kudlow, who said the Trump administration would unveil more tax cuts later this year.
President Donald Trump was expected to sign the deal at around 11:30 a.m. ET. Investors have been eagerly awaiting the signing of the so-called phase one trade agreement as the conflict between the world’s largest economies has dragged on for nearly two years.
“The risk in the market is that the trade situation deteriorates, not that it stays the way it is,” said Willie Deliwche, investment strategist at Baird. “If it’s improving, then by definition it’s not deteriorating and that’s a good thing.”
However, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer said in a joint statement Tuesday that existing U.S. tariffs on Chinese goods would stay in place even after the deal was signed.
There’s also concern over the details of the phase one agreement. A U.S. Trade Representative document said the deal includes a “dramatic expansion of U.S. food, agriculture and seafood product exports.” The USTR has also said China will buy at least $200 billion in U.S. products over a two-year period.
U.S. President Donald Trump speaks during a signing ceremony for the U.S.-China “phase-one” trade agreement in Washington, D.C., U.S., on Wednesday, Jan. 15, 2020.
Zach Gibson | Getty Images
Wall Street also kept an eye on Corporate America as the earnings season. Bank of America reported quarterly results that beat analyst expectations as bond-trading revenue ripped higher.
Goldman Sachs posted a revenue for the quarter that surpassed estimates. BlackRock, UnitedHealth and PNC Financial also posted quarterly earnings that beat analyst expectations.
So far, about 30 S&P 500 companies have released their quarterly numbers. Of those companies, 82% have posted better-than-expected profits, according to FactSet data.
Expectations for corporate profits were downbeat heading into the reporting period. FactSet estimated S&P 500 earnings to have fallen 2% in the fourth quarter on a year-over-year basis.
But Mark Haefele, global chief investment officer at UBS GWM, has a more upbeat outlook on the earnings season.
“We see the upcoming reporting season marking a turning point after a period of weak profit growth for US companies, one that should push equities higher this year even though the potential for further multiple expansion is modest in our view,” he said in a note. “So we have modestly increased our forecast for US EPS growth to 6% this year.”
In other corporate news, Target shares dropped more than 6% after the retailer announced disappointing holiday same-store sales. Target said its same-store sales during the holidays rose just 1.4%, compared to growth of 5.7% from the prior year.
—CNBC’s Silvia Amaro contributed to this report.
