Company / Analytics

Week 41 in Brief

North America

U.S. stocks closed higher Friday, booking a second straight week of gains boosted by strong earnings from big banks and positive September retail sales data.

How did the major indices perform?

• The Dow Jones Industrial Average jumped 382.20 points, or 1.1%, to close at 35,294.76.
• The S&P 500 climbed 33.11 points, or 0.8%, to finish at 4,471.37, handily above its 50-day moving average at 4,436.74 for the first time, after slipping below that level near the end of September.
• The Nasdaq Composite advanced 73.91 points, or 0.5%, to end at 14,897.34.
• All three major U.S. stock-market benchmarks posted a second straight week of gains. The Dow saw a weekly gain of 1.6%, while the S&P 500 advanced 1.8% and the Nasdaq rose 2.2%.

What drove the US market?

• Economic Data: Investors remained bullish on Friday after a report on September retail sales indicated that Americans are spending enough money to sustain an economic recovery from the pandemic, despite the additional inflationary costs. Retail sales climbed 0.7% last month, better than the 0.2% economic estimates.
• While sales rose in most major categories last month, consumer sentiment in October has slipped. A reading of consumer sentiment from the University of Michigan fell to 71.4 this month, from 72.8 in September.
• Big Bank earnings: Strong third-quarter earnings from big banks are also driving the recent rally. Earnings reports from banks this week exceeded expectations, including those from JPMorgan Chase, BlackRock, Citigroup, Bank of America, Morgan Stanley, and Wells Fargo. On Friday, Goldman Sachs reported a third-quarter net income of $5.28 billion, or $14.93 a share, compared with $3.23 billion, or $8.98 a share, in the year-ago period. Goldman’s stock rose 3.8% Friday, with the Dow component’s rally helping to buoy the price-weighted index. Big bank earnings are scrutinized for any indications as to the health of the US economy as it continues to reopen after pandemic restrictions.

Which US stocks were in focus Friday?

• Shares of Alcoa Corp. soared 15.2% Friday after the aluminum producer reported stronger-than-expected results and announced its first dividend since 2016 as well as a $500 million share buyback. The stock closed at $56.00.
• Virgin Galactic Inc. shares plunged 16.8%, closing at $20.01 after the firm delayed its next test flight and the start of its space tourism business
• Shares of Charles Schwab Corp. rose 3.6% hitting another record Friday after the discount broker reported third-quarter profit and revenue that rose above expectations.
• Shares of Prologis Inc. increased 0.9% after the real-estate investment trust focused on leasing logistics facilities reported third-quarter earnings that rose above expectations, and boosted its full-year outlook, amid record increases in market rents and valuations.

How did the European markets perform?

• European stocks closed higher on Friday as strong corporate earnings eased investor concerns about higher inflation and drove global markets higher. The pan-European Stoxx 600 closed up 0.7%, with banks adding 1.8% to lead gains while media stocks dropped 0.4%.
• Like their US counterparts, European banks recovered all their pandemic losses to trade at pre-pandemic levels on Friday.
• Retailers (.SXRP), oil & gas (.SXEP) and travel (.SXTP) all rose between 1.6% and 2%.
• European earnings kick into high gear in the next few weeks, with analysts expecting a near 47% jump in third-quarter profit for companies listed on STOXX 600. Energy and industrial companies are forecast to provide the biggest boost to earnings performance.
• In economic data, French consumer price inflation came in at negative 0.2% month-on-month in September. On an annual basis, it was 2.7% higher.
• Europe’s inflation upswing is still seen as temporary and there are no signs yet that the recent surge is becoming embedded in wages, European Central Bank President Christine Lagarde said on Thursday.
• In individual stocks, Finnish retailer Kesko climbed 6.4% on an analyst rating. At the bottom of the index, Swiss banking software firm Temenos tumbled more than 13% after missing third-quarter revenue expectations.
• UK-listed shares of Rio Tinto fell 1.4% after the Australian miner cut its 2021 iron ore shipments forecast, citing a tight labour market.

How did Asian markets perform?

• Asian shares edged up on Friday, building on Wall Street’s positive lead after a set of strong U.S. corporate earnings, although worries about the Chinese economy capped gains.
• MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.07% and was set for a 1.7% weekly gain, which would be its best weekly performance since early September, while Japan’s Nikkei surged 1.81%, led by tech stocks.
• Chinese shares rose more cautiously than elsewhere with blue chips up 0.43% and the Shanghai Composite index gaining 0.46%, as investors balanced expectations of policy easing against worries of a slowing economy, ahead of quarterly GDP data due Monday.
• The Taiex in Taiwan surged 2.4% on the day to 16,781.19, leading gains among the region’s major markets, as shares of Taiwan Semiconductor Manufacturing Company rose 4.71% following earnings release a day earlier.

Commodities and Bonds

• Oil prices were in focus after rising on Thursday when top producer Saudi Arabia dismissed requests for additional OPEC+ supply, while the International Energy Agency said spikes in natural gas prices could bolster oil demand from power generators.
• Prices continued to rise on Friday, with international benchmark Brent crude last trading above $84.80 per barrel on Friday afternoon in Europe.
• The yield on benchmark 10-year Treasury notes was 1.5301%, slightly higher on the day, after trending downwards this week from Tuesday’s four-month high of 1.631%.
• Gold futures ended lower Friday, falling nearly 1.7% to settle at $1,768.30 an ounce. For the week, gold gained 0.6%.

Currencies

• The dollar rose again to a near three-year high on the yen on Friday with one dollar buying 114.07 yen, the most since late 2018.
• The dollar index, which measures the greenback against a basket of currencies, was marginally lower on the day, at 93.97, and set for its first weekly decline versus major peers since the start of last month, having lost a little ground on sterling and the euro.
• Bitcoin hit a six-month high of $60,000 on Friday, approaching the record hit in April, as traders became increasingly confident U.S. regulators would approve the launch of an exchange-traded fund based on its futures contracts.

Next Week

• The earnings season continues with a tide of companies reporting.
• Investors will likely pay attention to reports from tech firms, including IBM, Intel, Netflix, Tesla, and others.