US stocks dipped on Tuesday, reversing earlier intraday record highs, following a report that the US would likely maintain tariffs on Chinese goods until after November’s presidential election. The eventual removal of tariffs by Washington would depend on Beijing’s compliance with the phase one trade accord, which is expected to be signed on Wednesday, Bloomberg reported, citing sources.

With the S&P 500 at record levels, equivalent to around 18 times expected earnings, algorithmic traders and human investors interpreted the Bloomberg report as a reason to sell. The Dow Jones Industrial Average, S&P 500 and Nasdaq each touched intraday record highs before losing ground in afternoon trade. The Dow ended the session with a modest gain. Wall Street has surged in recent weeks, fueled by optimism that a truce in US President Trump’s trade war with China would boost corporate earnings.

China has pledged to buy nearly an additional $80 billion of manufactured goods from the US over the next two years, and over $50 billion more in energy supplies, Reuters reported, citing a source briefed on the Phase 1 trade deal. Kicking off the fourth-quarter earnings season, JPMorgan Chase & Co rose 1.2 per cent after reporting a better-than-expected profit on strength in its trading and underwriting businesses. Wells Fargo & Co tumbled 5.4 per cent after reporting a slump in profit as it set aside $1.5 billion for legal expenses. Citigroup Inc rose 1.6 per cent as it topped Wall Street profit estimates.

Analysts expect profits at S&P 500 companies to drop 0.5 per cent for the second consecutive quarter, according to Refinitiv IBES data, largely due to a drag in energy and industrial earnings that have been hit by the prolonged Sino-US trade war. The Dow Jones Industrial Average ended up 0.11 per cent at 28,939.67 points, while the S&P 500 lost 0.15 per cent to 3,283.15.

Morning-Market-Note-Wednesday-15th-January

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