U.S. Stocks Climb Amid GE Earnings, S&P 500 Holds at 8-Week High

  • GE gains as quarterly profit beats estimates, sales miss
  • Investors now focusing on quarterly results as well as Fed

The Early Takeaways From Third-Quarter Earnings

General Electric Co. rose to a seven-year high amid better-than-estimated quarterly profits, leading an advance in U.S. stocks as the Standard & Poor’s 500 Index posted its longest weekly winning streak since May.

Equities stretched further above an area where a series of prior rebounds from a summer selloff had stalled. The leadership today shifted, however, to health-care and consumer shares, rather than this month’s stalwarts -- energy, raw-materials and industrials -- as those groups lagged amid a rising dollar. GE rallied 3.4 percent to its highest since September 2008. 

The S&P 500 added 0.5 percent in a late-day flourish to 2,033.11 at 4 p.m. in New York, extending an eight-week high. The gauge posted its third consecutive weekly gain. The Dow Jones Industrial Average rose 74.22 points, or 0.4 percent, to 17,215.97. The Nasdaq Composite Index climbed 0.3 percent, while the Russell 2000 Index sank less than 0.1 percent after falling as much as 0.9 percent. About 6.6 billion shares traded hands on U.S. exchanges, 10 percent below the three-month average.

“Investors are keying in on earnings season, which will really get rolling next week,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “It’s been a good week and month to date, which has the S&P back close to even for the year. The numbers are better than how it feels. Other issues, such as China, have quieted down.”

Along with GE, other companies that reported results today included Honeywell International Inc., which slid 1.5 percent after its revenue missed expectations and the company trimmed its full-year sales forecast. Schlumberger Ltd. lost 2.2 percent after reporting quarterly profit that declined from the previous year.

The focus on quarterly results is intensifying, with earnings at S&P 500 members projected to have fallen 6.7 percent in the last quarter. Energy and materials companies will see the steepest drop, according to analyst forecasts compiled by Bloomberg. Morgan Stanley, International Business Machines Corp., Boeing Co. and Microsoft Corp. are among 118 companies in the index scheduled to report next week.

Stocks are rebounding from their worst quarter in four years, while investor sentiment oscillates between concern at the ripple effects of China’s slowdown, and optimism that the Federal Reserve will delay increasing interest rates until policy makers are satisfied that overseas turbulence won’t derail U.S. growth. The S&P 500 rose 0.9 percent this week, and has rallied 8.9 percent from the low during an August selloff.

Traders now don’t see better-than-even odds of borrowing costs rising until March next year. The probability of an increase this year is 34 percent, down from 39 percent a week ago, after weaker-than-expected data in both the U.S. and China pushed out expectations for a rate boost.

Reports today were mixed, with U.S. factory output falling in September for a second month as high inventories and lukewarm demand from overseas customers kept American producers bogged down. A separate report showed consumer sentiment climbed more than forecast in October as lower-income Americans projected wage gains will accelerate and falling energy prices helped stretch paychecks.

The Chicago Board Options Exchange Volatility Index fell 6.2 percent Friday to 15.05, falling to its lowest since Aug. 18. The measure of market turbulence known as the VIX is down 39 percent this month, on pace for its biggest monthly drop ever. 

Nine of the S&P 500’s 10 main groups advanced today, with consumer staples and health-care stocks the best performers. Industrial companies were the only sector to slip.

Consumer staples companies in the benchmark increased 1 percent. as Altria Group Inc. and Tyson Foods Inc. added more than 1.4 percent. Philip Morris International Inc. rallied for a second day, up 2 percent. The world’s largest publicly traded tobacco company on Thursday topped quarterly profit estimates and raised the low end of its forecast, helped by higher prices and a recovering economy.

Health-care companies gained for a second day, paced by Tenet Healthcare Corp. and Universal Health Services Inc., which rose more than 2.5 percent. An exchange-traded fund tracking health-care services companies extended its two-day gain to 2.1 percent.

Twitter Inc. advanced 4.9 percent to a more than two-month high after former Microsoft Chief Executive Steve Ballmer said he has a 4 percent stake in the company. Ballmer tweeted early Friday a congratulations to the social-media company for its new Moments product, which helps users follow major events. “Glad I bought 4% past few months,” the post said.

Energy stocks erased a loss to finish Friday up 0.2 percent as crude oil rose for the first time this week. Exxon Mobil Corp. advanced 1.2 percent, bringing its October gain to 11 percent which would be the most since 2006. Diamond Offshore Drilling Inc. increased 2.3 percent.

Halliburton Co. slid 3.7 percent after competitor Schlumberger, the world’s largest oilfield services provider, declined the most in almost three weeks as its profit fell amid the deepening global crude market downturn. Halliburton is due to report quarterly results on Monday.

Wynn Resorts Ltd. declined 1.2 percent, trimming an earlier 10 percent plunge, after the casino operator posted a 27 percent drop in third-quarter revenue as results in Macau shrank by more than a third. Chief Executive Officer Steve Wynn also criticized Chinese bureaucrats who haven’t told him how many gaming tables he’ll get at his $4.1 billion resort scheduled to open in Macau on March 25. Wynn is the best-performing stock in the S&P 500 so far this month.

An index of transportation stocks slipped 1.6 percent as 16 out of 20 companies fell. The Bloomberg U.S. Airlines Index lost 1.5 percent, led by a 15 percent drop for Spirit Airlines Inc., the biggest in three years. The no-frills carrier that trumpets itself as “ultra low cost” tumbled to the lowest since 2013 after forecasting continued weakness in pricing. Kansas City Southern tumbled 11 percent, the most since January 2014, after the railroad’s quarterly results missed analysts’ forecasts.

Freeport-McMoRan Inc., another of the S&P 500’s top performers in October, fell 4.3 percent, the most in the raw-materials group. The copper producer dropped for the fourth time in five days, losing 7.8 percent during the stretch, after rallying 27 percent last week to help lead the S&P 500 to its best weekly gain this year. Alcoa Inc. slumped for a sixth day, down 1.6 percent amid its longest losing streak since August.

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