US shares closed mixed on Wednesday, with most tickers resisting hawkish comments from the head of the Federal Reserve as the steel sector and Netflix (NASDAQ:NFLX) had a boost, while the Dow was dragged down by Goldman Sachs (NYSE:GS) shares.
Janet Yellen, the Fed chair, warned that the US risks a “nasty surprise” if it prevaricates raising interest rates. She said she expects the US central bank to tighten monetary policy a few times a year until 2019, setting out her stall for tighter credit conditions of several years to come.
Speaking two days before Donald Trump’s inauguration as US President who prides himself on reflating the economy, Yellen also said slow productivity growth meant the rate of economic expansion would be “significantly slower than the post-world war two average”.
The S&P 500 market bellwether closed up 0.2% at 2271 and led by Netflix Inc (NASDAQ:NFLX) up 9.2% to $145 after Street-beating earnings. Before the bell, however, the stock had crept along and posted a 0.3% gain to $133.26.
Second top riser was wholesale distributor of industrial and construction supplies Fastenal Co (NASDAQ:FAST), up 5.8% to $51.05, after fourth-quarter earnings beat forecasts, albeit sales missed.
Meanwhile, Trump decided to act as investor relations for the largest-listed stock in the US, Apple Inc (NASDAQ:AAPL) by suggesting that Apple will bring some manufacturing to the US, saying he has had conversations with chief executive Tim Cook about the good it would do for the country.
Apple shares closed flat at $119.99. Meanwhile, the Nasdaq Composite ended 0.3% higher at 5,555.
Things were rockier for components of the Dow. Although Goldman Sachs trebled profits last year, investors homed in on the savings which the bank had made in terms of litigation expenses. Lower non-compensation expenses were primarily due to “significantly” lower net provisions for mortgage-related litigation and regulatory matters. Provisions for litigation and regulatory proceedings totaled $396mln in 2016 compared with $4.01bn in 2015.
Goldman shares closed down 0.7% at $234.29. The Dow, of whom Goldman represents 24% of any index moves, ended down 0.1% at 19,804.
The S&P Midcap 400 finished up 0.4% at 1679 – and just 20 points from a fresh record high - and led by United States Steel Corp (NYSE:X), up 8.3% to $34.90
The SP Smallcap 600 closed up 0.5% at 832 – also 25 points from a fresh record high - and led by Olympic Steel Inc (NASDAQ:ZEUS) up 7.9% to $25.24.
The 4Q16 earnings results season is quickly approaching. It kicks off with AK Steel’s (NYSE:AKS) and Steel Dynamics’ (NASDAQ:STLD) releases, which are scheduled for January 24. US Steel Corporation and Nucor (NYSE:NUE) are expected to release their 4Q16 earnings on January 31, while ArcelorMittal’s (NYSE:MT) 4Q16 release is scheduled for February 10.
All these stocks posted strong percentage gains on Wednesday.
Early trading
US stocks were mixed on Wednesday as investors absorbed a slew of earnings reports and investors grew anxious ahead of Donald Trump’s inauguration as President on Friday.
The S&P 500 down 0.03% at 2,267. The Dow Jones Industrial Average slid 0.06 % to 19,815, while the Nasdaq Composite gained 0.1% to 5,545.
Energy shares led the decline on the S&P 500, tracking lower with weaker oil prices.
But pundits were left scratching their heads to work out how upbeat results from banks still resulted in a lower S&P financials sector by 0.5%. Goldman Sachs (NYSE:GS) shares were 0.2% lower at $235.23 despite reporting that fourth-quarter profits had trebled. Meanwhile, shares in Citi (NYSE:C), which posted its first profit growth in four quarters, fell 1.3% to $57.64.
But the biggest financials faller, and the biggest on the S&P 500 overall, was Northern Trust Corp (NASDAQ:NTRS).
Late session, Fed chair Janet Yellen speaks, and this also is hampering upside.
The S&P Midcap 400 was up 0.2% at 1676 while the S&P Smallcap 600 advanced by 0.1% to 829.
Pre-Open
US stocks are expected to open flat-to-higher on Wednesday but the Dow Jones Industrial Average may struggle despite banks Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) reported buoyant earnings reports.
The S&P 500 market bellwether is set to open up 0.1% and the tech-heavy Nasdaq Composite up 0.2% while the Dow advances 0.1%.
But as was witnessed on Tuesday, the market can still reverse once pre-market and futures trading turns to the “real thing”.
Goldman Sachs has capped an unusually bright earnings season for the big US banks, delivering a trebling in fourth-quarter profit that handily beat analysts’ forecasts.
Like other banks on Wall Street, Goldman saw a big pick-up in trading activity during the period, as investors reset portfolios in anticipation of an interest-rate increase from the US Federal Reserve, and as the election of Donald Trump as President spurred big bets on stocks that stood to benefit
But the significance of Goldman is that it represents 24% of the upside of the Dow. Pre-market its shares were not soaring, up just 0.11% and then they reversed and were 0.4% lower at $234.81.
Expect no market favours from Citigroup which produced its first rise in profit for four quarters as the US bank joined rivals in reaping rewards from the election of Donald Trump.
Revenues from Citi’s fixed income division leapt 36% from a year earlier in the final three months of 2016 as clients made a flood of orders to position for the new presidency as well as the Federal Reserve’s decision on interest rates.
But Citi shares were down 0.7% at $58.00 pre-market.
Both banks had a hard act to follow, given last week’s stellar numbers from JP Morgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).
Markets have plenty to be jittery about.
Federal Reserve Chair Janet Yellen is scheduled to speak publicly in California on Wednesday. The event kicks off at 1500 ET (2000 GMT).
Wall Street will be watching to see if Yellen drops hints about how the Fed views plans from President-elect Donald Trump to stimulate the U.S. economy and create jobs.
She'll be speaking immediately after the 2 p.m. release of the Fed's Beige Book for January.
Wall Street is betting Trump's economic plans will push inflation higher. As a taste of where things are headed.