US: Stock rally produces 4th straight weekly gain

[NEW YORK] Surging tech earnings, a McDonald's comeback and a partnership between Oprah Winfrey and Weight Watchers helped push US stocks Friday to their fourth straight week of gains.

The S&P 500, erasing the memories of a horrendous third quarter, gained 42.04 points (2.07 per cent) to 2,075.15, moving back into positive territory for 2015.

The Dow Jones Industrial Average rose 430.73 (2.50 per cent) to 17,646.70, while the tech-rich Nasdaq Composite Index advanced 145.17 (2.97 per cent) to 5,031.86.

The gains followed a heavy week of earnings that crossed just about every major sector of the US economy.

Results overall were mixed, with some prominent disappointments and numerous big companies reporting lower revenues. But there were enough standout results from Microsoft, General Motors and other to keep the momentum rolling.

Stocks were also propelled by additional Central Bank largesse with the People's Bank of China cutting benchmark interest rates and European Central Bank chief Mario hinting at additional monetary stimulus in response to deflation worries.

"The juice is loose," said the title of a note from FXCM. "Central Banks Catapult Stock Prices Higher (Again)." But some were questioning how much longer the rally can go.

"You're going to need new news," said Art Hogan, chief market strategist at Wunderlich Securities.

"I would expect we either grind sideways, or give some back next week." Big winners in the earnings parade included Google parent Alphabet, which rode hot trends in mobile search and streaming video to huge profit gains; Amazon, which scored a surprise third-quarter profit based on surging sales; and Microsoft, which reported higher earnings based in part on the success of cloud-based software.

Strong results also came from companies in other sectors: General Motors bested earnings expectations on strong US sales; American Airlines and United Airlines parent United Continental reported record profits, due in part to lower fuel costs; and fast-food giant McDonald's showed signs of life, reporting its first positive US comparable sales in two years after launching all-day breakfast and a new "deluxe" buttermilk chicken sandwich.

Big losers included IBM, Yahoo, Harley-Davidson, Chipotle Mexican Grill and Pandora Media, which slumped 35.4 per cent following disappointing report Friday.

"We had extremely low expectations for earnings," Hogan said. "It hasn't taken much to beat expectations." Mr Hogan said the market has "compartmentalized" underperformers.

"You're having companies that are taken to the woodshed, but it's treated as company-specific, while allowing the overall tape to continue to rise," he said.

Among the flashiest non-earnings stories, much-admired talk-show host Oprah Winfrey announced a 10 per cent stake in Weight Watchers International and joined the company's board, helping shares to more than double.

Legendary Italian racing car Ferrari brought its trademark roar to Wall Street, rising solidly in its first day of trade after its initial public offering. The company's ticker is "RACE." Drugmaker Valeant Pharmaceuticals International found itself in the hot seat after a report from Citron Research accused the company of inflating its sales figures and questioned whether it should be considered the "pharmaceutical Enron." In deal news, flash memory specialist SanDisk announced it will be acquired by Western Digital for US$19 billion.

KFC owner Yum Brands announced it was splitting off its US$6.9 billion China business into a separate company.

Earnings season continues next week with reports from Apple, as well as pharmaceutical giants Merck and Pfizer and oil companies ExxonMobil and Chevron.

Key economic data include the first estimate for third-quarter US economic growth and the Conference Board's report on consumer confidence for October. The US Federal Reserve will also convene its October policy meeting.

AFP