Overseas Market Report Stocks End Higher After Earnings
U.S. stocks were choppy in early trading after a round of earnings reports, but staged a late rally to close higher on Friday.
U.S. retail sales were up 0.1% in September. Economists had expected a 0.2% rise. August's sales numbers were revised down to show no growth in that month. Sales were dragged down by a 3.2% decline in sales as gas stations. On a year-over-year basis, overall sales were up 2.4% or 4.9% excluding gasoline.
The producer price index fell 0.5% in September, far steeper than the 0.2% decline expected by economists. Excluding food and energy prices, prices were down 0.3% versus expectations of a 0.1% increase.
The Fed Beige Book showed that the economy was still expanding at a modest pace in October. Some regions did show some weakness due to the strength of the dollar.
At market close, the Dow was up 0.4%, the S&P 500 had lifted 0.5%, while the NASDAQ was 0.3% higher.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 59 cents (1.62%) to $36.06, ResMed gained 17 cents (0.30%) to $56.50, Telstra Corporation lost 15 cents (0.75%) to $19.81, Spark New Zealand added 16 cents (1.46%) to $10.81 and Westpac remained unchanged at $21.97.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.03% and the 5-year yield was 1.35%.
Shares of Wal-Mart (WMT) declined following the company's fiscal 2017 guidance. The firm expects earnings to be down 6%-12% as the firm invests in e-commerce and wages. Management also announced they expect sales to increase 3%-4% annually over the next three years.
JPMorgan Chase's (JPM) third-quarter results were marred by the volatility inherent in certain capital markets businesses and continued legal expense. Revenue in the firm's investment management and wealth management businesses declined as assets under management fell 4% and the firm experienced a small amount of outflows. Principal transactions revenue declined 11% from the third quarter of 2014 on weaker fixed-income trading. However, these temporary headwinds were offset by solid loan growth and continued reductions in personnel expenses. Gross loan balances expanded by 9% during the year while headcount fell by 3% and compensation expense by 6.5%.
Intel (INTC) reported fairly solid third-quarter results which exceeded its guidance as well as Morningstar's expectations. The firm's recently released sixth generation core processors (Skylake) helped bolster its client computing group sales while revenue from other segments like data centre, internet of things, and memory, each grew at least 10% year over year.
Wide-moat-rated BlackRock (BLK) closed out the third quarter in slightly better shape than Morningstar had forecast. BlackRock returned to positive flows during the third quarter, picking up $11.4 billion in flows from its actively managed funds (including $875 million from its equity operations and $8.7 billion from its fixed-income platform) and $23.5 billion from its iShares exchange-traded funds business (which generated $5.3 billion in equity inflows and an impressive $18.2 billion in bond ETF flows).
Wells Fargo (WFC) reported results that were roughly in line with analyst expectations. The firm said its earnings rose to $1.05 a share from $1.02 in the year-ago quarter. Loans grew, but net interest margins remained under pressure due to the low-rate environment.
Bank of America (BAC) reported better-than-expected results. The firm said it earned 37 cents a share in the quarter, up from 4 cents a share in the third quarter of 2014. The upbeat results were a product of lower legal costs and a modest 3.8% decline in trading revenue, which many had feared would be much worse given the market volatility.
European markets were higher.
The FTSE 100 and the French CAC 40 each rose 0.6%, while Germany's DAX was up 0.4%.
Asian shares were higher.
The Shanghai Composite gained 1.6%, the Nikkei 225 rose 1.1% and the Hang Seng was up 0.8%. India's Sensex was up 0.8%.
Australian Market Report – Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 22 points higher at 5,274.
Friday 16 October – close. The Australian market hit a seven-week high in early morning trade, encouraged by positive results from the US market overnight. A powerful rally in the major banks kept the index hovering well above the flat line throughout the day, offsetting the impact of falling mining stocks. All sectors closed in the green with the exception of information technology and materials. The Australian dollar depreciated against most major currencies.
The All Ordinaries added 38.10 points to 5,303.70 while the S&P/ASX 200 rose 38.20 points to 5,268.20.
Santos announced the first shipment of liquefied natural gas (LNG) from its US$18.5bn GLNG project has left Curtis Island bound for South Korea. The first cargo is being carried by the Malaysian-owned LNG ship Seri Bakti and will be delivered to South Korea in the coming weeks. Production from the first train commenced in September 2015 and work on the second train is continuing to progress well with Train 2 expected to be ready for start-up by the end 2015 with first LNG in the second quarter 2016. STO gained 20 cents to $5.54.
Rio Tinto (RIO)
Rio Tinto released strong third quarter production results. The Pilbara infrastructure expansion is complete with the ramp-up of iron ore mined capacity continuing to generate maximum value from the integrated system. Global iron ore production increased compared to 2014 through productivity gains and the ramp up of operations, with shipments on track to meet full year guidance. Third quarter production of iron ore was 12% higher than the same quarter of 2014 and was 8% above the second quarter of 2015. Mined copper on schedule to meet full year guidance, with Oyu Tolgoi benefiting from higher grades and Kennecott continuing its focus on the east wall de-weighting and de-watering. The group further refined its portfolio with the agreed sale of its interest in the Bengalla thermal coal JV for $606m. RIO lost 56 cents to $53.69.
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