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US: Wall St up on GDP, earnings; fund year-end lifts winners

Friday, October 31, 2014 - 06:44
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US stocks rose on Thursday, boosted by a strong reading on quarterly economic growth and by another round of upbeat earnings reports including Visa, which accounted for nearly 140 points in the Dow industrials.

[NEW YORK] US stocks rose on Thursday, boosted by a strong reading on quarterly economic growth and by another round of upbeat earnings reports including Visa, which accounted for nearly 140 points in the Dow industrials.

Despite the bullish data and the Federal Reserve's Wednesday statement indicating the economy is strengthening, gains on the S&P 500 were led by healthcare and utilities, traditionally defensive sectors.

Analysts cited mutual funds purchases of the best performing stocks for the run in those sectors, as funds close their books for the year at the end of this month. Healthcare and utilities are both up nearly 20 per cent year-to-date. "End of year for mutual funds is most likely going to be selling losers and continue to buy winners," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

Healthcare also got a boost by Bristol-Myers Squibb, up 8.9 per cent to US$58.98 after results from an experimental clinical trial on a lung cancer drug were encouraging.

Gross domestic product grew at a 3.5 per cent annual rate in the third quarter, beating expectations. A separate report showed first-time applications for unemployment benefits rose marginally last week, but a measure of underlying trends hit its lowest level since May 2000 in a show of labour market strength.

Adding to support from earnings and economic data, market participants cited a report from the Nikkei newspaper that confirmed expectations that Japan's Government Pension Investment Fund, considered a bellwether for other Japanese institutional investors, will cut holdings of Japanese bonds and add to local and foreign equities.

The iShares MSCI Japan ETF gained 0.8 per cent and US dollar denominated Nikkei futures gained 0.7 per cent. "The more you hear demand for equities picking up globally, that is going to be a net positive for US equities," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "If you look globally, growth is here in the United States," she said.

The Dow Jones industrial average rose 221.11 points, or 1.3 per cent, to 17,195.42, the S&P 500 gained 12.35 points, or 0.62 per cent, to 1,994.65 and the Nasdaq Composite added 16.91 points, or 0.37 per cent, to 4,566.14.

Visa jumped 10.2 per cent to US$236.65, the biggest boost to both the Dow and S&P 500, a day after it reported adjusted earnings that topped expectations, and said the mobile payment industry would be "a great driver" for business.

MasterCard also posted a better-than-expected profit, while revenue was up almost 13 per cent. Its shares added 9.4 per cent to US$83.13.

So far this reporting season, 75.5 per cent of S&P 500 companies have exceeded profit expectations, according to Thomson Reuters data, above the long-term average of 63 per cent.

The New York Stock Exchange said it had experienced an outage in publishing and receiving trades and quotes on two of its exchanges, the latest incident to hit data processors key to trading.

Within 10 minutes of the initial notification, the exchange released a statement that said the issue, which affected the NYSE and NYSE MKT exchanges, had been resolved. Traders noted that a sudden, huge surge in equity futures volume occurred concurrently with the problems, but could not say whether it was related.

Despite the outage, trading in NYSE-listed securities appeared to be relatively unaffected, with steady volume still seen in those issues.

Overall volume on US exchanges was 6.9 billion, below the daily average so far this month of 7.8 billion, according to BATS Global Markets data.

Advancing issues outnumbered declining ones on the NYSE by 1,948 to 1,116, for a 1.75-to-1 ratio on the upside; on the Nasdaq, 1,689 issues rose and 975 fell for a 1.73-to-1 ratio.

The benchmark S&P 500 index posted 81 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 125 new highs and 50 new lows.

REUTERS