Bank Earnings Buoy Wall Street
U.S. stock markets are higher today after sharp sell-offs across the board last week.
By Paolo Palazzi-Xirinachs
Tuesday, January 19, 2016 - 00:00
Strong results from the investment bank Morgan Stanley have given financial stocks a lift. Near midday, the Dow Jones Industrial Average was up 0.63% and the S&P 500 was up 0.57%, while the Nasdaq composite index gained 0.36%.
Today Delta Air Lines kicked off the airline industry’s earnings season. Investors had been looking forward to the airlines’ results almost as much as passengers have come to dread flying some airlines. Investors were not disappointed. Delta reported a bigger fourth-quarter profit, citing falling fuel prices. Delta expects fuel to be even less expensive in the first quarter of 2016.
In the immediate aftermath of the news, Delta shares rose 3.5%. Analysts have forecast that all three of America’s main carriers – American, Delta and United – will all report record annual profits, based on the price of fuel being roughly half of what it was two years ago. Jet fuel makes up around 30% of airline operations costs. Other factors buoying the airline sector are recovering economic growth and flat air fares – this, however, is a point of contention with consumer groups. There appear to be dark clouds amassing as a Department of Justice investigation starts to look into alleged price rigging between the big three airlines. A cover story in this week’sBloomberg Businessweek titled “United’s Quest to Be Less Awful” hasn’t helped matters, but may not deter investors.
In global news, European stocks snapped a three-day decline, rising for the first time since they entered a bear market last week. All 19 industry groups climbed, with commodity producers and energy companies leading gains.
Today also marks the start of the annual World Economic Forum in Davos. This year’s theme is the “fourth industrial revolution,” futurist code for accelerating technological change. The more than 2500 attendees will have much to discuss including Iran, Trump’s rise in the polls, the oil sector’s woes, and China’s slowdown perhaps being linked to the inevitable change from industrial to service economy. Iranian President Hassan Rouhani spoke to a packed auditorium at the gathering, a first for an Iranian leader, in an effort to normalize relations with Western countries, saying, “Come and visit Iran to see the investment opportunities." Iran’s oil is once again for sale, but with the already glutted market, Iran must diversify its economy and win new economic partners.
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