VOL. 42 | NO. 43 | Friday, October 26, 2018
Stocks rally on earnings a day after ending at 5-month lows
NEW YORK (AP) — U.S. stocks climbed Tuesday after solid earnings reports from several big companies. Stocks had closed at five-month lows the day before, and groups of companies that struggled badly made big gains.
Many of the best-performing stocks Tuesday came from parts of the market that have fared the worst during the market's plunge this month. Those included smaller and more U.S.-focused companies, internet and media companies, basic materials makers and energy companies.
Oreo maker Mondelez and athletic apparel maker Under Armour both jumped following strong third-quarter reports.
Corporate earnings are up about 20 percent this year as the U.S. economy gains strength and corporate taxes come down after last year's tax cut. Analysts expect company profits to keep growing in 2019, but at a slower pace.
Julian Emanuel, chief equity and derivative strategist for BTIG, said investors are worried about two things that could slow the economy further: the U.S.-China trade dispute, and the Federal Reserve raising interest rates.
"All of this fear about growth is being traded on something we don't see in the statistics right now," he said. "You factually don't have signs of an economic slowdown yet."
The S&P 500 index jumped 41.38 points, or 1.6 percent, to 2,682.63. On Monday the benchmark index closed at its lowest level since early May following a report that the Trump administration could announce more tariffs on imports from China in December.
The Dow Jones Industrial Average gained 431.72 points, or 1.8 percent, to 24,874.64. The Nasdaq composite advanced 111.36 points, or 1.6 percent, to 7,161.65. The Russell 2000 index of smaller-company stocks rose 29.33 points, or 2 percent, to 1,506.64.
Trading remained uneven: the S&P 500 fell at the start of trading and then turned sharply higher. In the afternoon the index gave up all of its gains and briefly turned lower, but recovered to finish near its highest levels of the day.
Mondelez, which makes Cadbury chocolates and Trident gum in addition to Oreos, rose by the most in a year after its quarterly profit surpassed analysts' projections. Its stock gained 5 percent to $42.12. Other household goods makers also did well. Walmart rose 2.6 percent to $102.42.
Among media companies, video game maker Take-Two Interactive soared 11 percent to $124.01 after it said its game "Red Dead Redemption 2" brought in $725 million in retail sales over its first three days. Take-Two shares are sharply lower this month as media, internet and technology companies have taken a beating.
Some of the worst losses during the market's current downturn were sustained by longtime investor favorites that had soared in recent months. Amazon and Netflix have both plunged 24 percent in October, but those companies had more to lose than many others did: Amazon is still up 31 percent this year, and Netflix has climbed 49 percent.
Elsewhere among internet and media companies, Comcast jumped 4.8 percent and Facebook rose 2.9 percent to $146.22. The social media company rose another 1.4 percent in aftermarket trading after its third-quarter profit was larger than analysts expected.
Among technology companies, chipmaker Intel rose 5.2 percent to $47.76.
While those stocks have slumped lately, the S&P 500's index of utilities and household goods makers have each climbed 3 percent this month. The broader S&P 500 has tumbled 7.9 percent over the same time.
General Electric cut its dividend again. The company halved its dividend to 12 cents from 24 cents in December, and cut it to 1 cent Tuesday. The struggling industrial giant also said the Justice Department has opened a criminal investigation into a $22 billion charge it booked to its power business this year. Securities regulators were also conducting a civil probe.
The stock sank 8.8 percent to $10.18, its lowest price since April 2009.
European stocks mostly fell following a report that the region's economy slowed down in the third quarter. The economy of the 19-country eurozone unexpectedly slowed in the third quarter. It expanded by 0.2 percent in the July-September period, which fell short of analyst forecasts. Experts say growth is likely to pick up again, but it's unlikely to match last year's strong performance as the region faces issues like Britain's departure from the EU, trade disputes and a clash with Italy over that country's budget.
Germany's DAX fell 0.4 percent and France's CAC 40 lost 0.2 percent. Britain's FTSE 100 added 0.1 percent.
A weakening of the Chinese yuan helped some stock indexes in Asia. Japan's Nikkei 225 index jumped 1.5 percent after official data showed that the unemployment rate dipped to 2.3 percent in September. South Korea's Kospi picked up 0.9 percent. Hong Kong's Hang Seng fell 0.9 percent.
Bond prices fell. The yield on the 10-year Treasury note rose to 3.12 percent from 3.08 percent.
Benchmark U.S. crude shed 1.3 percent to $66.18 per barrel in New York. Brent crude, used to price international oils, lost 1.8 percent to $75.91 per barrel in London.
Wholesale gasoline fell 1 percent to $1.81 a gallon. Heating oil lost 1.1 percent to $2.26 a gallon and natural gas declined 0.3 percent to $3.19 per 1,000 cubic feet.
Gold lost 0.2 percent to $1,225.30 an ounce. Silver rose 0.1 percent to $14.46 an ounce. Copper slumped 2.8 percent to $2.66 a pound.
The dollar rose to 112.96 yen from 112.35 yen. The euro fell to $1.1342 from $1.1390.
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AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP