Northwest Arkansas Democrat-Gazette
Markets rebound day after plunge
Interest rate, China trade worries continue to weigh down U.S. stock
NEW YORK — Strong results from major companies, including Microsoft and Visa, helped U.S. stocks bust out of another losing streak Thursday. The rally wiped out part of Wednesday’s market losses, but stocks are still down sharply over the past three weeks.
Shares of technology companies soared as Microsoft, Visa and Xilinx rallied after release of their quarterly earnings reports, while Twitter and Comcast led the way for Internet and media companies. Ford’s results helped consumer-focused stocks.
Some encouraging economic news helped stabilize markets. The Commerce Department said orders to U.S. factories for major manufactured goods grew in
September, and the increase was larger than analysts expected. In Europe, European Central Bank President Mario Draghi said the region’s economy is still growing at a solid clip even though there are signs it has weakened recently. Asian markets took big losses, as the U.S. market did Wednesday.
On Thursday, the S&P 500 index jumped 49.47 points, or 1.9 percent, to 2,705.57. The Dow Jones industrial average rose 401.13 points, or 1.6 percent, to 24,984.55 after rising as much as 520 points during the day. The Nasdaq surged 209.93 points, or 3 percent, to 7,318.34 after its biggest drop in seven years.
The S&P 500 had plunged 9.2 percent since Oct. 3 as investors worried about climbing interest rates and the effects of the U.S.-China trade dispute. The Nasdaq plummeted 11.4 percent through Wednesday.
Investors are worried that rising interest rates and disputes with trading partners could hurt the economy. They will get more insight today into how the U.S. is doing when the government reports on economic growth during the third quarter. Experts think the country’s gross domestic product grew 3.3 percent from July to September, according to Fact Set.
Microsoft surpassed analysts’ forecasts in the first quarter as it mined new revenue sources in online subscriptions, gaming and its LinkedIn professional networking service. Shares of the tech giant jumped 5.8 percent to $108.30.
“It’s certainly reassuring to see stocks bounce back [Thursday] on stronger earnings, but I would expect that we continue to see a lot of day-to-day volatility,” said Kate Warne, an investment strategist for Edward Jones.
Twitter shares soared 15.5 percent to $31.80, and electric-car maker Tesla jumped 9.1 percent to $314.86 after their quarterly reports.
The S&P 500 suffered two separate six-day losing streaks this month and had fallen for 13 out of the past 15 days. That stretch also included a couple of big rallies, but the losses erased the benchmark index’s gains from earlier in the year. After Thursday’s gains, the Dow and S&P 500 are each up about 1 percent for the year.
“There’s a transition going on and when there’s a transition going on, there’s a lot of volatility both up and down,” said Randy Swan, founder of Swan Global Investments, which manages $5 billion.
Sentiment has been tested in October, with global stocks poised for their worst month in more than six years as the effects of trade tensions and geopolitical uncertainty begin to bite. Investors remain apprehensive as a flood of earnings reports, while mostly stellar, have come with warnings about the future effects of tariffs and rising costs.
Central banks remain in the spotlight, with investors speculating about what, if any, effect the market uncertainty will have on policy decisions.
“The question is: can we go the distance?” said Donald Selkin, chief market strategist at Newbridge Securities.
Warne of Edward Jones said investors have been dumping shares of companies that reported weak results, while companies that surpassed expectations haven’t been rewarded much. She expects that to change when the dust settles.
“When we get beyond earnings season and investors are wondering what now can drive the market higher or lower, knowing that we had a strong earnings season and companies did not lower their guidance very much will provide some support for stocks,” she said.
Earnings for S&P 500 companies grew about 20 percent in the first and second quarters, and experts expect similar results for the third quarter.