The United States Congress finally passed a budget legislation that ended that government shutdown and raised the budget ceiling that prevented a potential default. As a result, the stock markets in the country traded higher on Thursday as investors speculate that the Federal Reserve will maintain the current level of its bond-buying program or quantitative easing (QE).
In an interview with CNBC, DoubleLine Capital CEO Jeffrey Gundlach said the recent budget standoff in Washington slowly eroded the credibility of the United States, given the fact that credit rating agencies started talking about downgrading its credit rating. He said there is skepticism towards the United States among foreign observers. He also projected that the Federal Reserve will continue the quantitative easing at least until the first quarter of 2014.
On the other hand, Walter Todd, chief investment officer at Greenwood Capital, shared the same view during a telephone interview with Bloomberg. According to him, “The taper seems a little bit further out, certainly more than anybody expected eight weeks ago and maybe even just a couple of weeks ago He helps manage $950 million. It keeps a lid on rates and provides more liquidity for risk assets like stocks. People are back to focusing on the individual company dynamics that occur during earnings season.”
Dallas Federal Reserve president Richard Fisher commented that the “fiscal shenanigans” weakened the case of policy makers to reduce the stimulus. Based on data compiled by Bloomberg, economists are projecting that the U.S. economy will grow by 1.6 percent this year, which is the slowest annual growth since 2009.
U.S. Markets
- Dow Jones Industrial Average (DJIA)- 15, 37`.65 (-0.01%)
- S&P 500- 1,733.15 (+0.67%)
- NASDAQ- 3,863.15 (+0.62%)
- Russell 2000- 1,100.55 (+0.74%)
European Markets
- EURO STOXX 50 Price EUR- 3, 010.39 (-0.17%)
- FTSE 100 Index- 6,576.16 (+0.07%)
- Deutsche Borse AG German Stock Index DAX- 8,811.98 (-0.38%)
Asia Pacific Markets
- Nikkei 225- 14,586.51 (+0.83%)
- Hong Kong Hang Seng Index- 23,094.88 (-0.57%)
- Shanghai Shenzhen CSI 300 Index- 2, 413.33 (-0.33%)
Stocks in Focus
The stock price of American Express Company (NYSE:AXP) climbed 5% to $80.15 a share after reporting a 9% increase in net income to $1.4 billion or $1.25 earnings per share in the third quarter. The credit card company said its revenue rose by 6% to $8.3 billion. American Express said credit card spending increased by 7.3% compared to the same period a year ago. Argus reiterated its buy rating for the stock and raised its price target to $90 per share.
International Business Machines Corp. (NYSE:IBM) tumbled by more than 6% to $174.35 after the company’s third quarter revenue of $23.7 billion missed the consensus estimates of Wall Street analysts. IBM generated $3.99 earnings per share during the quarter. UBS analyst Steven Milunovich reduced its price target for the stock from $235 to $186 per share. He explained, “The poor near-term results and questions raised about farther out earnings power can’t be ignored. Normally, we would wait out mediocre results in preparation for the bounce back, but there are too many questions this time.”
The stock value of SanDisk Corporation (NASDAQ:SNDK) surged almost 9% to $68.50 per share after reporting third quarter earnings results that beat the average estimate of Wall Street analysts. The company generated $1.51 adjusted earnings per share and $1.63 billion revenue.
Meanwhile, Verizon Communications Inc (NYSE:VZ) climbed nearly 4% to $48.91 per share after the company reported better-than-expected financial results. The company’s total revenue was $39.28 billion and its earnings per share was $0.74. The company added 1.1 million wireless customers during the quarter.
