Nasdaq Composite surges more than 2% as tech giants Amazon, Microsoft, Alphabet and Intel turn up trumps with results
S&P 500 rises 21 points to 2,581
Dow Jones struggles along in their wake, up 33 at 23,434
US GDP growth strong in third quarter despite effects of hurricanes
Friday was a bumper day for tech stocks, pushing the Nasdaq Composite and S&P 500 to new record high closing levels.
The S&P 500 climbed 21 points (0.8%) to 2,581 while the Nasdaq Composite soared 144 points (2.2%) to 6,701.
The Dow Jones average, which seeks to represent the spectrum of the US economy and therefore has fewer tech giants among its constituents, rose just 33 points (0.1%) to 23,434.
For decades the duopoly of computer chip manufacturer Intel Corporation (NASDAQ:INTC) and computer operating system designer Microsoft Corporation (NASDAQ:MSFT) provided both with a license to print money, and the move away from desktop devices has diluted their dominance, both are still going well.
Both closed at record levels after releasing results. Microsoft's market capitalization rose above US$600bn level for the first since the dot.com bubble burst, after it posted earnings per share (EPS) of 84 cents, compared to market expectations of 71 cents.
Intel's third quarter EPS rose to 94 cents from 69 cents a year earlier and “Chipzilla” also raised its outlook earnings for the year.
Meanwhile, Google's owner, Alphabet, joined Apple in the US$700bn market cap club after its shares rose 4.3% in the wake of a third quarter update released after the close of trading on Thursday.
In Canada, the S&P/TSX Composite rose 62 points to 15,954.
Mid-session
Boosted by better-than-expected results from tech giants last night, the tech-heavy Nasdaq Composite was flying in the lunchtime trading session.
The index was up more than 2%, or 135 points, at 6,691.
The S&P 500 was also going well, rising 20 points to 2,581 but the Dow Jones Average was making harder work of it, up just 31 at 23,432.
Amazon.com Inc (NASDAQ:AMZN) shot up 13% to US$1,098.44 after catching the market on the hop last night with its earnings update.
The online retail leviathan's third quarter net income of US$256mln on revenue of US$43.7bn beat market expectations.
Earnings per share of 52 cents were half a dollar above the consensus forecast.
Microsoft Corporation (NASDAQ:MSFT) proved there is life in the old dog yet rising 7.1% to US$84.37 on the back of strong third quarter results.
Net income of US$6.58bn was equivalent to 84 cents a share and up from US$5.67bn (72 cents a share) a year earlier
The median forecast among analysts who follow the stock was for unchanged earnings of 72 cents a share.
Completing a trio of tech giants receiving a warm welcome from the market, Google's parent company Alphabet Inc (NASDAQ:GOOGL) saw its shares rise 5.7% to US$1,048.45 after it reported third quarter net income of US$6.73bn, up from US$6.33bn in the same period of 2016.
Earnings per share rose to US$9.57 from US$7.25 and were comfortably ahead of the consensus forecast of US$8.31.
Open
Stocks opened mostly higher, helped by a surprisingly strong gross domestic product (GDP) report for the third quarter.
The US economy grew at an annualized 3% from a year earlier in the third quarter, which was down from 3.1% in the preceding quarter but better than the 2.7% economists had been predicting.
Looking at the US GDP data the stand out number is a 6% ( annualised) increase in Investment driven by equipment.
— Shaun Richards (@notayesmansecon) October 27, 2017
“In spite of the obstacles thrown in its path by two devastating hurricanes, the US economy is flying at a fair clip. We may even see this accelerate in the last part of the year as economic activity that was hit by hurricanes Harvey and Irma recovers, and in the longer-term, we should see infrastructure investment in the areas most heavily affected,” opined Nancy Curtin, chief investment officer at Close Brothers Asset Management.
“These figures all but confirm the Fed’s current trajectory on normalisation. That said, the imminent leadership announcement will help decide the rate of monetary policy change. For Trump to succeed in his goals of strong growth, he’ll be looking for someone that will synchronise tighter monetary policy with his plans for looser fiscal policy, and sustaining 3% growth. Whilst Powell or Yellen would likely see gradual interest rate normalisation continue, Trump may favour the more disruptive, hawkish Warsh. If growth remains robust and inflation steady, Warsh’s deregulation and approach to interest rates should prove positive for risk assets,” she added.
The S&P was up 12 at 2,573 in the first half hour of trading but the gain on the Dow Jones Average was a bit more pedestrian – up 13 at 23,413, due in part to a negative reaction to results from index heavyweights Chevron Corp (NYSE:CVX) and Merck & Co Inc (NYSE:MRK).
Both beat market forecasts but both saw their shares dive more than 3% in early trading.
Pre-market
Yesterday it was the turn of tech giants to beat earnings forecast; this morning oil giant Exxon Mobil Corporation (NYSE:XOM) got in on the act.
The “beat” was, perhaps, not as spectacular as those registered yesterday by Amazon.com, Microsoft and Google-owner Alphabet, but it was enough to send shares 62 cents higher in pre-market trading to US$84.09.
Net income of US$3.97bn in the third quarter was equivalent to 93 cents a share, up from US$2.65bn (63 cents a share) the year before.
The median forecast among analysts who follow the integrated oil major was for earnings per share of 86 cents on revenue of US$62.8bn.
Exxon's big rival, Chevron Corporation (NYSE:CVX), found the market harder to please.
The shares were off 1.4% at US$116.75 after the company unveiled net income of US$1.95bn, up from US$1.28bn the year before.
Earnings per share rose to US$1.03 from 68 cents the year before and was five cents above the market's consensus forecast.
Revenue climbed to US$36.2bn from US$30.1bn and was ahead of the Street's expectation of US$34.5bn.
When trading starts, focus is likely to be on Aetna Inc (NYSE:AET) after the Wall Street Journal reported that CVS Health Corp (NYSE:CVS) is in talks to buy the healthcare benefits company.
Both stocks were up a shade in pre-market trading on a morning when the major benchmarks are expected to add yesterday’s gains.
The Dow Jones average, which rose 71 points to close at 23,401 yesterday, was expected to open at around 23,424.
The S&P 500, which rose just over 3 points yesterday to 2,560.4, was – according to spread betting quotes - expected to open at around 2,569.6.