Stocks Stumble After Mnuchin Trade Remarks; JPM, Citi Earnings Solid

After Treasury Secretary Steven Mnuchin remarked that tariffs on many Chinese goods would remain in place until later in the eyar and possibly beyond, only the Dow Jones Industrial Average managed to remain positive, as the major indices erased solid gains from earlier in the day, sending stocks sliding through the afternoon.

Mnuchin maintained that import tariffs would remain in place until the US and China agree on Phase 2 of their trade arrangement. His remarks came a day before the leaders of the world's two largest economies are set to sign a Phase 1 deal on Wednesday.

Washington and Beijing agreed to suspend tariffs on $160 billion in Chinese-made cellphones, laptop computers and other goods that were due to take effect on Dec. 15, and to cut in half existing tariffs on $120 billion of other goods to 7.5%. The Phase 1 deal keeps 25% tariffs on $250 billion of other Chinese goods in place. Mnuchin did not offer a timetable for when Phase 2 would be worked out, but the consensus believes such a deal would not be fully negotiated until after the November US elections.

A formal signing of Phase 1 documents is slated for 11:30 am ET, Wednesday at the White House.

Trade and tariffs continue to be the hot topic by which to move stocks and it seems likely that trend will continue through most of - if not all of - 2020, though with lesser impact. The Chinese representatives are sure to engage in some foot-dragging, hedging that President Trump may not be around for the completion of Phase 2. For its part, the administration will be busy with the politics of a presidential election, which will divert resources and attention away from trade dealings.

Those are positive developments in the larger scheme of things. The public is weary of Democrat attempts to weaken the president or impeach him. Business leaders largely view the entire political spectrum with jaded skepticism, believing that the poorly-managed impeachment proceedings initiated by the House of Representatives is a waste of time.

Right on cue, the House will debate and then vote on a resolution to advance articles of impeachment - which were passed nearly a month ago (December 18) - on Wednesday. Normally, no such vote is needed, though this impeachment process has been anything but normal. Another vote in the House gives Democrats another opportunity to bad-mouth the president while taking attention away from the signing of the trade accord. The measure is likely to sail through along party lines, with a Senate trial to begin on Tuesday of next week (January 21).

House Majority Leader, Nancy Pelosi's stalling of the process seems to have benefitted nobody except possibly President Trump. By not immediately handing over the articles of impeachment and naming managers, Pelosi comes off looking petty, conflicted, and frankly, ridiculous.

It is widely considered that President Trump will be acquitted by the Senate in short order, allowing democrat presidential candidates Elizabeth Warren, Amy Klobuchar, and Bernie Sanders to get back on the campaign trail before the Iowa caucuses the first week of February.

Until then, some market surprises could come in the form of earnings from various companies. Mega-banks JP Morgan Chase and Citigroup reported on Tuesday, with JPM showing EPS of $2.57, which smashed expectations for $1.98. Citi boosted revenues above consensus to over $18bn while EPS came at $1.90, beyond expectations for $1.83. Wells Fargo bucked the trend, reporting earnings below consensus. Share prices for JPM and Citi were up +1.17% and +1.56%, respectively, but Wells Fargo closed lower, down -5.39%.

Prior to the opening bell Wednesday morning, Bank of America said earnings for the fourth quarter were 74 cents per share, up 5.7% from the same period last year and better than the 68 cent consensus forecast.

Goldman Sachs (GS) reporting on Wednesday morning, showed quarterly earnings of $4.69 a share, trailing the $5.56 average of estimates from analysts surveyed by Refinitiv. Net income tumbled 24 percent to $1.92 billion. Those results sent stock futures tumbling further into the red.

The FOMC is scheduled to meet the last week of January. Their meeting is scheduled for the 28th and 29th.

At the Close, Tuesday, January 14, 2020:
Dow Jones Industrial Average: 28,939.67, +32.57 (+0.11%)
NASDAQ: 9,251.33, -22.60 (-0.24%)
S&P 500: 3,283.15, -4.98 (-0.15%)
NYSE Composite: 14,037.13, -5.47 (-0.04%)