(Corrects daily percentage gain for S&P in third paragraph and
removes reference to S&P in second sentence in same paragraph)
* Investors bet on Fed's stimulus measures extending into
2014
* Morgan Stanley earnings, revenue beat expectations
* Health sector sags on predicted cuts to Medicare
* Indexes up: Dow 0.2 pct, S&P up 0.7 pct, Nasdaq 1.3 pct
By Julia Edwards
NEW YORK, Oct 18 (Reuters) - The S&P 500 closed at a record
high for the second straight day on Friday to cap its biggest
weekly gain in three months as stronger-than-expected earnings
from Google, Morgan Stanley and others overshadowed worry that
earnings growth was faltering.
The reassuring signals on profitability augmented investors'
relief over the resolution earlier in the week of the budget
impasse in Washington that had threatened to trigger a
potentially catastrophic default on the U.S. debt.
The S&P 500 closed up 0.7 percent, while the Nasdaq rose 1.3
percent to finish at its highest since 2000. It was the largest
daily gain for the Nasdaq in a week.
Google Inc grabbed most of the spotlight, with its
shares gaining 13.8 percent to clear the $1,000 mark for the
first time, ending the session at $1011.41. Its rise came a day
after the search engine company posted results that beat
forecasts and helped lead the S&P technology sector to
outperform all other sectors with a 1.8 percent rise.
"Washington and everything that happened with the budget
talks has cleared out, and we are refocusing on earnings. We
have companies coming in next week that you think would beat
numbers or do pretty well. That should allow this kind of
momentum to continue into next week," said Daniel Morgan, senior
portfolio manager at Synovus Trust Company in Georgia.
Morgan said he expects Netflix and Apple, whose earnings
reports are due next week, to perform like Google because they
are new tech, unlike International Business Machines,
which reported low revenue from earnings growth on Thursday.
Should Morgan's view bear out, it could help lift a fairly
bleak outlook for third-quarter earnings, which are expected to
show year-over-year growth of just 2.1 percent, less than half
the second quarter's 4.9 percent and the lowest growth rate in a
year.
U.S. stocks caught an updraft beginning Wednesday when it
finally became clear that Congress would vote to end a 16-day
partial shutdown of the government and extend the federal
government's borrowing authority. Republicans seeking to derail
President Obama's signature healthcare law had been refusing to
lift the statutory debt ceiling, leaving the U.S. Treasury just
days from being unable to pay the nation's bills.
The market's rise was also aided by expectations that the
Federal Reserve will delay trimming its massive stimulus
measures due in no small part to the damage inflicted on the
economy by the government shutdown, which ended on Thursday.
"Truthfully most of this is the market pricing in the high
likelihood that there will be a continuation of monetary policy
through the spring," said Jeff Buetow, chief investment officer
at Innealta Capital in Austin, Texas, which manages $3 billion
in assets.
The Dow Jones industrial average was up 28.00 points,
or 0.18 percent, at 15,399.65. The Standard & Poor's 500 Index
was up 11.35 points, or 0.65 percent, at 1,744.50. The
Nasdaq Composite Index was up 51.13 points, or 1.32
percent, at 3,914.28.
For the week, the S&P gained 2.4 percent, the Nasdaq gained
3.2 percent, and the Dow Jones industrial average gained 1.1
percent. For the S&P and Nasdaq, it was the largest weekly gain
since mid-July.
The temporary resolution of the budget standoff in
Washington also prompted the biggest weekly decline in the CBOE
Volatility Index in seven months. Wall Street's favored
gauge of investor fear fell 17 percent on the week to finish at
its lowest end-of-day level in two months.
Health was the only declining S&P sector, down 0.5 percent,
on predictions from UnitedHealth that the new healthcare
law's provision to decrease private Medicare payments could hurt
earnings. UnitedHealth shares fell 3.2 percent
to $69.08.
Morgan Stanley shares rose 2.6 percent to $29.71
after the company reported a 50 percent rise in quarterly
revenue as higher income from equities sales and trading offset
a drop in its fixed-income business.
General Electric said its third-quarter profit and
revenue fell as its finance business shrunk, but Wall Street
looked beyond those numbers to GE's improving profit margins and
growing order demand. GE shares rose 3.6 percent to $25.56.
Of the 98 companies in the S&P 500 that have reported so
far, 62.2 percent have topped Wall Street's earnings
expectations, just shy of the 63 percent average since 1994 but
below the 66 percent beat rate over the past four quarters,
according to Thomson Reuters data through Friday.
On revenue, 53.1 percent of the S&P 500 components have
beaten expectations, short of the 61 percent rate since 2002 but
above the 49 percent beat rate over the past four quarters.
Volume was slightly above average at 5.57 billion total
shares traded.
(Reporting by Julia Edwards; Editing by Leslie Adler and
Kenneth Barry)
- Stocks & Offerings
- Finance
- Morgan Stanley
- Nasdaq
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