By Donato Paolo Mancini
U.S. stocks struggled for direction Monday as a batch of mixed earnings reports spurred volatility among bank stocks.
The Dow Jones Industrial Average fell 12 points, or less than 0.1%, to 26399 shortly after the opening bell. The S&P 500 rose less than 0.1% and the Nasdaq Composite added less than 0.1%.
Stocks have drifted higher in quiet trade the past few weeks as investors have waited to get a sense of how U.S. corporations fared in the first quarter. Earnings reports released before the opening bell Monday from Goldman Sachs, Citigroup, M&T Bank and Charles Schwab sent shares of lenders and brokerages swinging.
Goldman shares lost ground after the bank reported first-quarter profit fell, hit by quiet trading and underwriting. Citigroup shares edged lower even after the bank said better-than-expected earnings helped offset a worse-than-expected slide in revenue.
In Europe, the pan-continental Stoxx Europe 600 gained 0.1% in midday trade, with its major and regional banks subsectors rising the most.
Bond yields have recently signaled increased optimism about the economy, steepening the yield curve -- a bullish sign for investors. On Monday, 10-year U.S. Treasury yields ticked up to 2.562% from 2.560% Friday afternoon. Yields move inversely to prices.
"Financials will clearly benefit after having suffered through a curve flattening for such a prolonged period," said Seema Shah, global investment strategist at Principal Global Investors.
The WSJ dollar index, which measures the greenback against a basket of 16 peers, was down less than 0.1%.
In Asia, Hong Kong's Hang Seng slipped 0.3% after rallying in earlier trading, while Japan's Nikkei 225 jumped 1.4%.
Earnings will remain in focus this week, with big names like Bank of America and Netflix set to report numbers.
Trade tensions between the U.S. and China remained, though U.S. Treasury Secretary Steven Mnuchin said the countries were "getting close to the final round of concluding issues." Two phone calls are scheduled this week, but in-person meetings will likely be needed to seal any deal.
"It's very clear that there's a matching will to de-escalate," said Trinh Nguyen, a Hong Kong-based senior economist for emerging Asia, with Natixis. "The extent to which it will be de-escalated is the question."
"This is why I say extension-trade is the theme of the year," she said, referring to markets' tendency to kick the can down the road. "The global economy cannot take an escalated U.S.-China trade war, particularly because a U.S. president is up for re-election. He needs the situation to be smooth-sailing."
Central bank signals and International Monetary Fund remarks underscored the cautious mood after upbeat U.S. bank earnings last week buoyed markets, with the S&P 500 notching its third consecutive week of gains.
In its annual report on global fiscal policies, the IMF singled out Germany, Korea and Australia as countries that could do more to boost the slowing global economy, while central banks, including the Federal Reserve and the European Central Bank, signaled continued dovishness.
"Markets currently only want to know whether a rebound of the global economy is in the cards or not," said Carsten Brzeski, chief economist at ING in Germany.
Market participants will be paying close attention to Chinese data, including gross domestic product, later this week.
Later Monday, U.S. and Japanese delegations will meet in Washington to discuss trade arrangements. The move comes nearly seven months after both countries agreed to start bilateral trade talks.
(END) Dow Jones Newswires
April 15, 2019 09:57 ET (13:57 GMT)
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