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Stocks push higher amid big bank results

Emily McCormick

U.S. stocks climbed as mixed signals abroad pulled focus from the most recent batch of corporate earnings, which included results from several major banks. The results of a Brexit vote in the U.K. parliament and positive signs for China’s economy added noise to Tuesday’s trading.

The S&P 500 ( ^GSPC ) rose 1.07%, or 27.69 points, as of market close. The Dow ( ^DJI ) increased 0.65%, or 155.75 points. The Nasdaq ( ^IXIC ) rose 1.71%, or 117.92 points, as Netflix shares climbed following reports the streaming giant will be raising its prices.

European stocks traded choppily as British Prime Minister Theresa May faced a parliamentary vote on her deal to exit the European Union. May lost by 230 votes, with lawmakers voting by 432 to 202 to reject the deal. May’s deal was widely expected to be defeated, and the  aftermath of the loss is instrumental in determining the path forward before the country is due to depart the EU on March 29.

At least one firm has advised its clients to avoid trading the pound today due to expected volatility for sterling surrounding the vote.

“Over the next 24 hours what all we’re going to find out is the degree to which May loses, how much she loses by,” David Bailin, global head of investments at Citi Private Bank, told Bloomberg News in Singapore. “That is not something that one actually trades on.”

The pound ( GBPUSD=X ) was down by more than 1% against the US dollar on Tuesday immediately following the vote, but then shot back up to trade above $1.28.

NEW YORK, NY – JANUARY 2: Traders and financial professionals work at the opening bell on the floor of the New York Stock Exchange (NYSE), January 2, 2019 in New York City. The Dow Jones Industrial Average dipped more than 250 points at the open on the first day of trading in the new year. (Photo by Drew Angerer/Getty Images)

Stocks in Asia, however, were more firmly in the green as China’s central bank said it plans to cut taxes, increase spending and provide financing to businesses to help spur the country’s trade war-battered economy. Between July and September, China’s economy expanded at an annual pace of 6.5%, the slowest rate of growth since the global financial crisis. Other recent economic data has pointed to softening in the country’s key manufacturing sector.

Amid a confluence of global concerns, “the standard measure of policy uncertainty is flashing red,” Torsten Slok, chief international economist for Deutsche Bank, wrote in a note Tuesday.

“It is difficult for investors and central banks to navigate in this environment,” he added. “Expect more dovishness from global central banks as long as uncertainty persists.”

Global economic policy uncertainty index

Several major U.S. companies shed light on other concerns affecting domestic corporations in earnings results reported today. JPMorgan Chase ( JPM ), the largest U.S. bank by assets, missed on quarterly profit expectations largely due to weakness in fixed income trading revenue, reaffirming concerns for the financial sector amid heightened market volatility in the final months of 2018. JPMorgan Chase’s results come following Citigroup’s quarterly report on Monday, during which the bank missed expectations for quarterly revenue in part because of a 21% decline in fixed income trading.

JPMorgan Chase CEO Jamie Dimon also called for more collaboration between political leaders in Washington, D.C., and the business community as turmoil between the two threatens to weigh on corporations and the broader economy.

“As we head into 2019, we urge our country’s leaders to strike a collaborative, constructive tone, which would reinforce already-strong consumer and business sentiment,” he said in a statement. “Businesses, government and communities need to work together to solve problems and help strengthen the economy for the benefit of everyone.”

Separately, Delta Airlines ( DAL ), in its quarterly earnings report Tuesday, cited the partial government shutdown as one of the factors impacting the company’s revenue for its March quarter. The company now sees adjusted unit revenue to be between flat and up two percent for the quarter.

The shutdown has affected airlines requiring federal officials to approve plans to introduce new jets and routes. Plus, the absentee rate of TSA screeners – who will not receive regular paychecks during the shutdown – has climbed, leading to long lines at airports.

ECONOMY: U.S. Producer Price Index declined more than expected in December

The U.S. Producers Price Index declined 0.2% in December, dropping further than the expected 0.1% decline. In November, the index, which measures the change in selling prices for producers of goods and services, declined 0.1% month-over-month.

The index for final demand excluding food and energy prices fell 0.1% in December, dropping below the 0.2% increase expected. Excluding food, energy and trade services prices, the index remained flat in December, also below the 0.2% expected rise.

The Empire State Manufacturing Survey , a measure of manufacturing activity in New York state, fell to a reading of 3.9 in January, a sharp decline from an upwardly revised reading of 11.5 in December. Consensus expectations had called for the index to register at 10 for January. The results extend a trend of tepid manufacturing results from other regional Federal Reserve banks, fueling concerns of a weakening U.S. economy.  In December, manufacturing surveys from the Philadelphia, Richmond and Federal Reserve banks also disappointed.

Taken together, the PPI and Empire State Manufacturing Survey results make a case for Federal Reserve “patience” when it comes to future interest rate increases, Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note Tuesday.

“Subdued inflation alone won’t stop the Fed from hiking, especially if the incoming data continue to suggest the domestic economy remains strong,” Pearce said. “Unfortunately, the NY Fed manufacturing survey for January, also released this morning, showed that the global slowdown is continuing to take its toll on the manufacturing sector…With the global outlook still gloomy, the case for Fed ‘patience’ is building.” 

STOCKS: Netflix is increasing its prices; shares rise

Netflix ( NFLX ) will be raising its prices between 13% and 18%, representing the fourth and largest increase since the streaming service launched 12 years ago. Under the new pricing model, the cheapest plan will cost $9 from $8 prior, and its most popular HD Standard plan will cost $13 from $11. The 4K Premium plan will cost $16 from $14. New customers will be affected immediately, while existing customers will see changes over the next three months. Shares of Netflix rose 6.52% to $354.64 each as of market close, as investors widely took the price hikes to mean increased revenue for the debt-laden streamer.

CVS ( CVS ) said on Tuesday that Walmart ( WMT ) is planning to leave CVS’s drugstore networks over ongoing pricing disputes. If the split finalizes, people whose employers have CVS-administered drug benefits and Medicaid enrollees with CVS drug coverage may not be able to use their plans to pay for prescriptions at Walmart. CVS Caremark, CVS Health’s pharmacy-benefits unit, said the issue is not expected to materially impact CVS’s financial results.

Microsoft ( MSFT ) and Walgreens Boots Alliance ( WBA ) announced Tuesday they have entered a seven-year agreement to research and develop ways of delivering healthcare services digitally. Walgreens plans to move the majority of its IT infrastructure to Microsoft’s Azure cloud service, and Microsoft will offer its Microsoft 365 product suite to Walgreens’ more than 380,000 employees and stores globally.

Goodyear Tire ( GT ) announced in a presentation Tuesday that fourth-quarter tire unit volumes fell about 3% due to weakness in the original equipment environment in China and India, declines in the winter tire market in Europe late and supply constraints on volume for high-value-added consumer and commercial truck tires in the U.S. The company said these factors, combined with earnings declines in other tire-related businesses, has led it to reduce its outlook for net income and total segment operating income to below previous guidance of about $1.3 billion for the full year of 2018. Goodyear is the latest company to cut guidance due in part to weakness in China, following Apple’s ( AAPL ) cut to fiscal first quarter 2019 revenue guidance earlier this month. 

Emily McCormick is a reporter for Yahoo Finance.  Follow her on Twitter: @emily_mcck

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