Market Primer: Friday, October 18: S&P 500 Hits Record High, Dollar Suffers
The US government’s 11th hour deal on Thursday helped more than 80 percent of S&P 500 stocks rise in value on Thursday.
The index broke its intraday trading record and closed at an all time high. Technology was the only sector to falter with IBM’s weaker than expected revenue taking the company’s shares down 6.4 percent.
The dollar slipped to an eight month low early on Friday as most saw the US budget deal as a temporary fix that merely postponed another battle between Democrats and Republicans in Washington.
The American currency was also weighed down by speculation that the US Federal Reserve will stay well away from tapering its bond buying program in the coming months due to the shutdown’s effects on the nation’s economy as well as the possibility of round two of the budget showdown in early 2014.
In other news around the markets:
- On Friday, Bank of Japan Governor Haruhiko Kuroda said that the effects of the Japanese central bank’s stimulus programs are spreading through the economy and are evident in the country’s improving economic activity and prices. Kuroda said the bank will continue with its easing until a price stability target of two percent is achieved.
- China’s GDP grew 7.8 percent in the third quarter, its fastest pace in 2013. However, many are questioning whether or not the nation can sustain that level of growth. Analysts see the People’s Bank of China shifting its stance from expansionary to neutral in the fourth quarter.
- The UK is encouraging Chinese companies to invest and potentially take majority stakes in nuclear-power programs. On Thursday, the British government said Chinese companies like China National Nuclear Corp could initially take minority positions nuclear projects, but over time garner a majority stake.
- Ebay Inc’s founder, Pierre Omidyar, is planning to create a new media organization which he hopes will ‘convert mainstream readers into engaged citizens’. Omidyar is looking to recruit journalists who used Edward Snowden’s leaked documents to expose the US’ surveillance program for his new endeavor.
Asian markets were mostly higher on Friday. China’s Shanghai composite was up 0.24 percent and the Shenzhen composite gained 0.53 percent. The Hang Seng index was up 1.06 percent but the Japanese NIKKEI lost 0.17 percent.
European markets were up across the board heading into the weekend; the UK’s FTSE was up 0.22 percent and the eurozone STOXX 600 gained 0.26 percent. The Spanish IBEX was up 0.44 percent and France’s CAC 40 rose 0.27 percent.
Energy futures were quiet with Brent futures for November delivery up 0.06 percent and WTI futures were up 0.07 percent. Gold lost 0.26 percent and silver fell 0.10 percent. Industrial metals were mixed with copper up 0.64 percent and tin down 1.17 percent.
Currency markets were quiet on Friday, the euro traded steadily at $1.36 and the yen to dollar ratio was flat at ¥97.90. The British pound gained 0.10 percent against the American currency and the Australian dollar was up 0.13 percent against the greenback.
Notable earnings released on Thursday included:
- Google Inc. (NASDAQ: GOOG) reported third quarter EPS of $10.74 on revenue of $11.90 billion, compared to last year’s EPS of $9.03 per share on revenue of $11.33 billion.
- Goldman Sachs Group (NYSE: GS) reported third quarter EPS of $2.88 on revenue of $6.72 billion, compared to last year’s EPS of $2.85 on revenue of $8.35 billion.
- Verizon Communications Inc. (NYSE: VZ) reported third quarter EPS of $0.77 on revenue of $30.28 billion, compared to last year’s EPS of $0.64 on revenue of $29.01 billion.
- UnitedHealth Group Inc. (NYSE: UNH) reported third quarter EPS of $1.53 on revenue of $30.62 billion, compared to last year’s EPS of $1.50 on revenue of $27.30 billion.
- Intuitive Surgical, Inc. (NASDAQ: ISRG) reported third quarter EPS of $3.99 on revenue of $499.00 million, compared to last year’s EPS of $3.54 on revenue of $525.61 million.
Stocks moving in the pre-market included:
- JC Penney Company Inc (NYSE: JCP gained 0.41 percent in pre-market trade following an 8.13 percent loss over the last five days.
- AT&T Inc. (NYSE: T) gained 0.17 percent in pre-market trade after gaining 0.70 percent over the past week.
- UnitedHealth Group Inc (NYSE: UNH) lost 0.42 percent in pre-market trade after falling 5.08 percent on Thursday
Earnings reports expected on Friday include:
- Morgan Stanley (NYSE: MS) is expected to report third quarter EPS of $0.46 on revenue of $7.76 billion, compared to last year’s loss of $0.55 per share on revenue of $5.29 billion.
- General Electric Company (NYSE: GE) is expected to report third quarter EPS of $0.36 on revenue of $35.90 billion, compared to last year’s EPS of $0.36 on revenue of $36.35 billion.
- Ingersoll-Rand plc (NYSE: IR) is expected to report EPS of $1.10 on revenue of $3.73 billion, compared to last year’s EPS of $1.07 on revenue of $3.59 billion.
- Schlumberger N.V. (NYSE: SLB) is expected to report third quarter EPS of $1.24 on revenue of $11.59 billion, compared to last year’s EPS of $1.08 on revenue of $10.61 billion.
- Honeywell International (NYSE: HON) is expected to report EPS of $1.24 on revenue of $9.92 billion, compared to last year’s EPS of $1.20 on revenue of $9.34 billion.
Friday will be another quiet day for economic releases. Investors will be watching for Canadian CPI, the Mexican unemployment rate, and US leading indicators.
Happy trading and good luck!
For a recap of Thursday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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