It’s been a big day for macroeconomic news and a big day for corporate earnings.
By Peter Martin
Friday, October 24, 2014
The macroeconomic news has been OK, most of the earnings have been good and, though it doesn’t always necessarily work this way, this has translated into a big stock market rally — not the first of the week.
All 3 leading stock index benchmarks have climbed well over 1% today, the NASDAQ 100 proving the best of the bunch, with its 1.87% leap to 4023.4. The others weren’t too far behind in afternoon trading though: the Dow Jones Industrial Average gained 1.53% or 252 points to 16,713 and the S&P 500 index rose 1.55% or 30.0 points to 1957.1. The advance of the Dow Jones returns the index to positive territory for the year.
Dow components Caterpillar, 3M and AT&T all reported quarterly earnings today, with Microsoft set to announce after the market closes tonight. Industrial bellwether Caterpillar ($CAT) smashed estimates of $1.36 per share with earnings of $1.72 per share and also hiked its financial outlook for 2014. Share in the company surged more than 5%.
Shares in the diversified technology conglomerate 3M ($MMM)jumped a similar amount after it also exceeded expectations for its earnings, though it fell short with revenue. AT&T ($T) disappointed with small misses for both earnings and revenue, while also slashing its full-year guidance. Its share fell by 2.6%.
Macroeconomic news released today has been encouraging both domestically and for Europe, the latter being something of a rarity lately. Markit’s composite PMI for the Eurozone came in above expectations at 52.2 for October’s flash reading.
Though this is a tick below September’s mid-month reading of 52.3, it is above the final level for September, with the manufacturing PMI advancing to 50.7. Initial jobless claims in the US rose 17,000 to 283,000 last week. Despite this weekly increase, the overall trend still looks promising, with the four-week moving average improving from 284,000 to 281,000, the lowest level seen since May 2000.
The latest indications point to a slight slowing in US manufacturing this month. Markit’s manufacturing PMI for October came in at 56.2 versus 57.9 mid-month and 57.5 final in September. Slightly more worrying than the headline level, which itself is a three-month low, is that the softening is rooted in the most forward-looking component of the index: new orders rose at the slowest pace in nine months and spending patterns were described as more cautious. Output also slowed. Nevertheless, an overall reading of 56.2 still points to robust manufacturing expansion.
The Federal Housing Finance Agency (FHFA) reported a 0.5% rise in its house price index for August, improving the year -on-year change to 4.8%. Tuesday’s existing home sales report showed a pick-up in that part of the housing market and tomorrow we will be able to see new home sales data, which is released at 10.00 ET.
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