Upbeat Earnings Underpin S&P 500 Rebound
25-Oct-18 16:20 ET
Dow +401.13 at 24984.55, Nasdaq +209.93 at 7318.52, S&P +49.47 at 2705.71
[BRIEFING.COM] Stocks staged a welcome rebound on Thursday, but not before giving up some gains in the last hour. Reassuring earnings reports from high-profile and widely-held companies, and the underlying sense that market conditions had become oversold, underpinned the rally.
The S&P 500 climbed back into positive territory for the year, closing 1.9% higher on Thursday, as the consumer discretionary (+3.4%), information technology (+3.3%), and communication services (+2.7%) sectors posted strong gains to pace the broad market advance.
The Dow Jones Industrial Average gained 1.6%, the Nasdaq Composite gained 3.0%, and the Russell 2000 gained 2.2%.
Heavyweight Microsoft (MSFT 108.30, +5.98) powered the recently struggling information technology sector, closing 5.8% higher after reporting above-consensus top and bottom lines. In addition, the Dow component remained upbeat on its fiscal second quarter outlook. For the month, the information technology sector is still down 7.9%.
Tesla (TSLA 314.86, +26.36, +9.1%) and Twitter (TWTR 31.80, +4.26, +15.5%) provided ammunition for momentum stocks after comfortably exceeding earnings expectations. Tesla, in fact, surprised investors by turning a profit last quarter. Likewise, the FANG bunch put on a show, led by Amazon (AMZN 1782.17, +117.97) and Alphabet (GOOG 1095.57, +44.86) sporting gains of 7.1% and 4.3%, respectively, ahead of their earnings reports.
In the same spirit, Ford (F 8.99, +0.81, +9.9%), Visa (V 140.52, +6.26, +4.7%), Comcast (CMCSA 35.84, +1.72, +5.0%), American Airlines (AAL 32.37, +2.03, +6.7%), and Whirlpool (WHR 111.34, +7.07, +6.8%) all finished with healthy gains, capitalizing on better-than-expected earnings results.
Interestingly, the market did not pay any heed to some notable warnings from companies on Thursday like it has in recent sessions.
For instance, Advanced Micro Devices (AMD 19.27, -3.52, -15.5%) issued a revenue warning for the fourth quarter, and Southwest Air (LUV 49.91, -4.67, -8.6%) acknowledged that it is facing some higher-than-expected cost pressures. Despite the news, the Philadelphia Semiconductor Index and the Dow Jones Transportation Average, which house the respective companies, climbed 2.3% and 1.9% apiece.
U.S. Treasuries remained relatively quiet despite the renewed interest in stocks. The Fed-sensitive 2-yr yield was unchanged at 2.86%, while the benchmark 10-yr yield closed one basis point higher at 3.14%. In addition, the U.S. Dollar Index, which measures the dollar against six major currencies, rose 0.2% to 96.67, re-testing a two-month high. Elsewhere, WTI crude settled 0.9% higher at $67.33/bbl, extending its recent rebound after touching a two-month low.
Overseas, the European Central Bank (ECB) left its key interest rates unchanged, as expected. ECB President Draghi said the central bank will continue to monitor risks to the outlook but that the ECB has not talked about extending its quantitative easing program. European markets traded positively amid the news, as Italian budget angst momentarily faded into the background.
Reviewing Thursday's economic data:
Durable Goods orders for September increased 0.8% (Briefing.com consensus -1.8%) after a revised 4.6% increase (from 4.5%) in August. Excluding transportation, durable goods orders increased 0.1% (Briefing.com consensus 0.3%) after a revised 0.3% increase (from 0.1%) in August.
The key takeaway from the report is that the headline increase was driven by growth in transportation equipment orders and defense aircraft and parts orders while growth in other areas was more of a mixed bag.
Initial claims for the week ending October 20 increased by 5,000 to 215,000 (Briefing.com consensus 211,000). Continuing claims for the week ending October 13 decreased by 5,000 to 1.636 million, which is the lowest level since August 4, 1973.
The key takeaway from the report is that the trend of steadily decreasing initial and continuing claims has been uninterrupted by today's report.
Pending home sales for September increased 0.5% (Briefing.com consensus -0.2%)
Adv. International Trade in Goods for September were -$76.0 billion (Briefing.com consensus -$74.4 billion)
Adv. Retail Inventories for September +0.1%
Adv. Wholesale Inventories for September +0.3%
Looking ahead, investors will receive the consequential Advance Q3 GDP Report, which is the broadest measure of U.S. economic activity, with the supplementary Q3 GDP Deflator. Also, the final reading for the University of Michigan Index of Consumer Sentiment for October will be released.
Nasdaq Composite +6.0% YTD
S&P 500 +1.2% YTD
Dow Jones Industrial Average +1.1% YTD
Russell 2000 -2.3% YTD
