US markets rise on good earnings reports | IFCM India
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US markets rise on good earnings reports - 21.10.2014

US markets rose for the third day as investor confidence was boosted by good corporate earnings reports. Corporate earnings are expected to increase 6.7 percent from a year earlier. Most companies report better than expected earnings, with 63.2 percent of the 87 companies in the S&P 500 that have published quarterly earnings data by Monday reporting earnings that have beat analyst expectation. Some 130 S&P 500 companies are scheduled to report corporate earnings this week. The S&P 500 gained 17.25 points, or 0.9% to 1,904.01. It is still a few points below its 200-day moving average after falling below that level last Monday. The Dow Jones Industrial Average closed 19.26 points, or 0.1%, higher at 16,399.67. It is down 1.1% since the start of the year. The Nasdaq Composite rose 57.64 points, or 1.4%, to 4,316.07, led by gains in biotech and internet stocks. The gains of major stock indexes would have been higher if IBM hadn’t posted disappointing quarterly results. IBM ’s earnings missed analysts’ expectations, and shares fell 7.1%, the biggest drop among the Dow and the S&P 500 constituents. IBM also said it will sell its global semiconductor technology business to Globalfoundries, paying $1.5 billion in cash to the company over the next three years. Apple climbed 2.1 percent to $99.76 in regular trading. The company reported a better-than-expected 12 percent jump in revenue after the markets closed, and shares rose 0.2 percent in after-hours extended trading. Today at 16:00 CET Existing Home Sales data for September for US will be released, the tentative forecast is positive. Positive data will indicate further strengthening of US economic recovery.

Dow Jones Industrial Average

European markets fell on Monday after previous session’s gains. The fall came after German business software maker SAP cut its outlook for full-year operating profit and its stock plunged 5.8 percent, causing a slide in technology shares. The European STOXX 600 Technology index fell 2.4 percent. German DAX declined 1.5 percent, lagging other major European stock indexes. On this backdrop the European Central Bank has started buying covered bonds in an effort to revive the euro zone economy and ward off deflation. The euro zone annual inflation of 0.3 percent in September was far below the ECB target of close to but below 2 percent. The new purchases program starts after ECB program provided four-year loans for banks and its main interest rate was cut to almost zero. Later this year ECB plans to expand the asset purchase program by starting buying bundled loans or asset backed securities.

As statistics released in China showed the world’s second largest economy grew slower than in the second quarter, Asian shares retreated after giving up small gains on Tuesday. China's gross national product expanded 7.3 percent between July and September from a year earlier, slightly above expectations but slower than the 7.5 percent in the second quarter. The lower growth rate makes it unlikely the Chinese economic growth will meet the official annual growth target of 7.5 percent for the first time in 15 years. Analysts expect the growth rate will increase only slightly in the fourth quarter as Chinese authorities have announced they don’t plan any aggressive support measures. The Nikkei dropped 1.2 percent after surging 4 percent on Monday, its biggest rise since June 2013.

Oil fell as increased global supply exceeds the falling demand due to weakening economies. Brent for December settlement declined 76 cents to end the session at $85.40 a barrel on the London-based ICE Futures Europe exchange. The futures dropped to $82.60 on October 16, the lowest level since November 2010. Prices are down 23 percent this year. WTI for November delivery decreased 4 cents to close at $82.71 a barrel on the New York Mercantile Exchange. The more-active December contract slipped 15 cents to close at $81.91. Investors are watching whether Saudi Arabia will cut production to support prices. In its monthly report on October 14 the International Energy Agency said Saudi Arabia, the world’s biggest exporter, has “appeared determined to defend its market share” in Asia, even at the expense of lower prices. Analysts expect the price to settle at a level that will balance the budgets of major producers. Estimates vary, with London-based analyst Robert Burgess in an October 17 report estimating Saudi Arabia’s break-even price is $99.20, others predicting further falls in price.

Brent

Spot gold rose as much as 0.3 percent to $1,250.35 an ounce, the highest since September 10, and traded at $1,249.39 at 2:24 p.m. in Singapore. Gold last week posted the first consecutive weekly gain since July as the dollar dropped from a four-year high on speculation slowing global growth may prompt the Federal Reserve to delay raising borrowing costs. Policy makers Federal Reserve are expected to stop bond purchases next week, ending the quantitative easing program. Global economic recovery and stronger dollar put a downward pressure on gold as demand for safe haven asset decreases.

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