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Stocks close higher as Goldman posts best day in 10 years

CNBC logo CNBC 1/16/2019 Fred Imbert and Ryan Browne

Stocks ended higher Wednesday as traders cheered strong quarterly earnings from major banks like Goldman Sachs and Bank of America.

The Dow gained 141 points as Goldman Sachs outperformed. The S&P 500 gained 0.2 percent, led by a 2.2 percent gain in financials. The Nasdaq climbed 0.15 percent.

Goldman Sachs posted blowout quarterly earnings, sending the stock up 9.5 percent, its biggest one-day gain since 2009. Bank of America also rose 7 percent after reporting a record quarterly profit. The reports follow the releases of fourth-quarter results from Citigroup, J.P. Morgan Chase and Wells Fargo earlier this week. Morgan Stanley, another major bank, is scheduled to report on Thursday.

"For Bank of America, they performed well in their traditional banking areas," said Ken Leon, an analyst at CFRA Research. "We did see better-than-peers deposit and loan growth. There was also healthy growth in consumer banking." Leon added Bank of America also had "more balanced and positive view than the other banks."

"Overall, Goldman had a good quarter. We did not see a multibillion dollar reserve for Malaysia," Leon said, referring to the 1MDB scandal.

Separately, United Continental surged more than 6 percent after the company posted better-than expected earnings on Tuesday. Delta Air Lines and American Air Lines also rose on Wednesday.

More than 6 percent of S&P 500 companies have reported calendar fourth-quarter earnings, according to FactSet. Of those companies, 85.3 percent have reported better-than-expected earnings.

However, strong earnings growth will be hard to find moving forward, according to Nick Raich, CEO of The Earnings Scout. "While stocks are in rally mode, S&P 500 EPS growth expectations are continuing to fall," Raich said in a note to clients. "Negative earnings momentum is a powerful force though investors should not become complacent."

The moves Wednesday follow solid gains in the previous session. The Dow closed more than 100 points higher on Tuesday as tech shares outperformed.

Equities have bounced back sharply this year after suffering massive losses to near the end of 2018. The major indexes were up at least 3.16 percent year to date. Since Dec. 24, they have all gained at least 8.8 percent. Stocks sold off towards the end of last year in part because of fear that the global economy was slowing down.

"In 2018, the U.S. recovery was on a path toward recession. It couldn't last much longer growing above 3% in real terms and 5.5% in nominal terms, with an unemployment rate below 4%," said Jim Paulsen, chief investment strategist at The Leuthold Group. "The challenge was to stay appropriately cautious in the face of good news. This year, investment success may require remaining fairly bullish in the face of bad news."

Traders also assessed news that the U.K. leader had lost a vote on her Brexit deal by 230 votes, which is believed to be the highest margin of defeat for any sitting government in British political history.

Prime Minister Theresa May told lawmakers that her Conservative government "will listen" following the vote and that a statement will be made in Parliament on January 21 where the prime minister is due to present a "plan B" for the withdrawal agreement.

U.K. opposition leader Jeremy Corbyn, who leads Britain's Labour party, said he has tabled a motion of no confidence in the government that will be debated and voted on Wednesday.

Nordstrom shares fell more than 5 percent after the company said sales at some stores were "below expectations" during the holiday season. Meanwhile, Snap dropped more than 12 percent on news the company's CFO was resigning.


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