The stock markets in the United States rallied driven by increasing speculations regarding the bond-buying effort of the European Central Bank (ECB) to stimulate the economy. The markets also benefited from the stronger than expected corporate earnings today.
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The ECB entered the $3.3 billion covered bond market. Last month, ECB President Mario Draghi disclosed plans to boost access to financing by companies and households. He also revealed ECB’s plan to expand the balance sheets of banks by as much €1 trillion to prevent deflation the European region.
The European stock markets also gained today after suffering four weeks of declines due to concerns that the region could face another recession, which could negatively affect the U.S. economic growth as the Federal Reserve ends its quantitative easing (QE).
The markets started to rebound last week after St. Louis Federal Reserve Bank James Bullard stated that policy makers should consider delaying the end of the bond-buying program to prevent the decline of inflation expectations.
[drizzle]In a telephone interview with Bloomberg, Benjamin Dunn, president of Alpha Theory Advisors commented, “The market’s a sugar addict and the sweet nectar of free money, any kind of incremental liquidity from a central bank, whether it’s Europe or China, is what the market is looking for.” He added that the “focus is shifting to earnings and away from macro.”
According to Bloomberg, 79% of S&P 500 companies that already reported quarterly earnings that beat consensus estimates while 60% reported revenues that exceeded expectations.
John Buckly, portfolio manager at Baring Asset Management in London said, “The focus may go back to the micro, the corporate, as we get into the meat of the reporting season.
“The quarter reported may be tough because of the global and geopolitical uncertainty, but guidance will be crucial and that’ll have some tailwinds in terms of lower commodity prices and weaker euro,” added Buckly.
U.S. Markets
- Dow Jones Industrial Average (DJIA) – 16,380.34 (+1.63%)
- S&P 500- 1,886.34 (+1.63%)
- NASDAQ- 4,258.44 (+0.97%)
- Russell 2000- 1,083.72 (-0.22%)
European Markets
- EURO STOXX 50 Price EUR- 2,991.46 (+2.19%)
- FTSE 100 Index- 6,372.33 (+1.68%)
- Deutsche Borse AG German Stock Index DAX- 8,886.96 (+1.94%
Asia-Pacific Markets
- Nikkei 225- 14,804.28 (-2.03%)
- Hong Kong Hang Seng Index- 23,088.58 (+0.08%)
- Shanghai Shenzhen CSI 300 Index- 2,433.38 (-0.87%)
Stocks in Focus
The stock price of Apple Inc. (NASDAQ:AAPL) gained 2.72% to $102.47 per share after reporting better than expected earnings for the third quarter. The company expected to generate revenue in the range of $63.5 to $66.5 billion for fourth quarter, higher than consensus estimates.
The Coca-Cola Company (NYSE:KO) dropped 6% to $40.68 per share after the world’s largest beverage maker stated that it will not be able to meet its profit growth target for the fiscal 2014. For the third quarter, Coca-Cola reported earnings of $2.11 billion or $0.48 per share, which is lower than its $2.43 billion net income of $0.54 in earnings per share in the same period last year.
The shares of Texas Instruments Incorporated (NASDAQ:TXN) rose more than 5% to $46.77 per share after the company reported strong quarterly results. The company posted an 8% increase in revenue to $3.5 billion and earnings of $0.76 per share.
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