December 13, 2017
Friday, October 17, 2014

Wall St up on earnings; car makers lead European equity rebound

US stocks extended their rebound from this month's bruising selloff today, giving the S&P 500 its best day in over a week, as worries about the US earnings outlook eased, but the S&P 500 still posted its fourth straight week of declines.

The S&P 500's streak of weekly losses was its longest since August 2011, and the index still is off 6.2 percent from its Sept. 18 record high. The drop follows worries over the health of the global economy, the spread of the Ebola virus, as well as factors including lower oil prices and uncertainty about the Federal Reserve's next steps.

However, the broad index this week steered clear of correction territory, a 10-percent drop from its high.

Friday's earnings offset some of the concerns about the impact of weak global demand on US corporations. Honeywell shares gained 4.3 percent to $90.06 after results. General Electric shares rose 2.4 percent to $24.82 on its earnings.

The S&P 500 posted its biggest one-day percentage gain since Oct. 8 and some investors said the recent selloff may have run its course.

Small caps closed lower. The Russell 2000 index was down 0.4 percent after a three-day streak of more than 1 percent gains, its best since July 2012. The index gained 2.8 percent for the week.

The Dow Jones industrial average rose 263.17 points, or 1.63 percent, to 16,380.41, the S&P 500 gained 24 points, or 1.29 percent, to 1,886.76 and the Nasdaq Composite added 41.05 points, or 0.97 percent, to 4,258.44.

For the week, the Dow and S&P were down 1 percent while the Nasdaq was down 0.4 percent.

Housing shares were among the day's best performers after a Wall Street Journal report said Fannie Mae and Freddie Mac are close to an agreement that could boost mortgage lending. Shares of D.R. Horton rose 6.2 percent to $21.56, while shares of Toll Brothers gained 2.5 percent to $31.23.

Also lifting the sector were increases in US September housing starts and permits.

The S&P energy index was up 0.9 percent, helped by shares of Schlumberger, up 3.7 percent to $93.97. The world's largest oilfield services company's third-quarter profit beat estimates.

The largest percentage gainer on the S&P 500 was Mead Johnson Nutrition, up 9.9 percent to $100.23, after sources told Reuters that French food giant Danone has decided to pursue a takeover. The largest percentage was Urban Outfitters, down 14.3 percent at $29.62, after it warned on its sales.

About 8.4 billion shares changed hands on US exchanges, close to the 8.5 billion average for the month to date, according to BATS Global Markets.

Meanwhile, European stocks rebounded after their steepest two-day fall in more than a year, with car makers leading the pack after strong sales data.

Among the top gainers were Renault, up 2.8 percent and PSA Peugeot Citroen up 5.2 percent, boosted by data showing car sales in Europe rose 6.1 percent in September, the 13th straight month of growth in sales.

The FTSEurofirst 300 index of top European shares had risen 1.4 percent to 1,263.32 points, after shedding 3.8 percent in the previous two sessions, their steepest fall since June 2013.

The Euro STOXX 50 index of 50 European companies rose 3.1 percent in the biggest jump in almost 18 months, shy two-hundredths of percentage point of being the biggest single-day jump since September 2012.

Global equity markets have been recovering since US data yesterday showed initial jobless claims fell to their lowest in 14 years, and industrial output rose sharply in September.

Today's session was very volatile, however, in part due to the expiry of derivative contracts, traders said.

Traders and fund managers had bought Euro Stoxx 50 put options in a 3,100-2,900 points channel and brokers sold the underlying shares to hedge those contracts when the cash index dropped below those levels this week.

The month-long sell-off in European stocks has prompted US-based investors to slash their exposure to Europe, according to data from Thomson Reuters Lipper.

A Lipper poll of 109 US-domiciled funds invested in European stocks, which include exchange-traded funds' (ETFs) holdings, shows net outflows of $1.3 billion in the seven days to Oct. 15, the biggest weekly redemptions since Lipper started to monitor the data in 1992.

In this context, many fund managers were holding on to their equity holdings or or even increasing their equity positions, seeing value in shares after the recent slide in prices.

On the downside, a warning from Rolls-Royce that it would not return to growth next year sent shares in the British engineering group down 12.3 percent.

Rolls, the world's No. 2 maker of aircraft engines behind U.S. group General Electric, blamed worsening economic conditions and tightening Russian trade sanctions for hitting next year's results. It said orders were being cancelled and delayed in its nuclear and energy and power systems businesses.

Shares in technology firm Gemalto tumbled 8.5 percent after Apple unveiled a new SIM card that will be installed in its iPads, sparking worries over the future of Gemalto's own smart chips for mobile phones, traders said.

Apple said yesterday its new iPad Air 2 will allow subscribers to switch wireless carriers much more easily, by swiping an icon across the screen of the device.

Meanwhile, foreign investors continued to sell Japanese cash stocks last week, posting their biggest net selling in two months, as buyers shunned riskier assets amid fears of weakening global growth.

Foreigners, who were net sellers for the past two weeks, sold a total of 337.1 billion yen ($3.2 billion) worth of Japanese stocks during the week of Oct. 6-10, the biggest weekly selling since the first week of August, data from the Tokyo Stock Exchange showed today. Retail investors and trust banks, which manage corporate pension trusts and national pension fund trusts, were net buyers.

Following last week's 2.6 percent decline, the Nikkei share average extended its losing streak and tumbled another 5.0 percent this week.

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