By Joyce Yu
Philadelphia, PA–Stocks were mixed on Tuesday morning with a flow of earnings from large corporations including Morgan Stanley, Goldman Sachs Group Inc. and UnitedHealth Group Inc.
The Dow Jones industrial average rose 0.4% Monday, approaching its new milestone of 23,000 points. The index has been up roughly 25% since last November. The S&P 500 gained 0.2% on Monday, while the Nasdaq was up 0.3%. Tuesday morning, the Dow Jones Industrial Average drifted higher 0.07%, and the S&P 500 and the Nasdaq fell 0.02% and 0.05% respectively.
Led by growth in wealth management, Morgan Stanley posted higher earnings than analysts projected with earnings per share of 93 cents outperforming estimates of 81 cents. Goldman Sachs posted third-quarter earnings of $5.02 a share, topping Wall Street forecasts of $4.17. UnitedHealth Group Inc. while beating on its bottom line, missed on the top. Johnson & Johnson and IBM will also announce today.
Shares in Netflix extended its gain after better-than-expected results on Monday. The company added more than 5 million new subscribers in the third quarter. It now has 109 million customers, up from 86 million in the same quarter a year ago. Netflix also said it would spend at least $7 billion on content next year.
As of now, less than 10% of S&P 500 companies have reported earnings, the majority of which have bested profit and sales estimates. Analysts anticipate blended earnings growth of 4.1% in the third quarter, and revenue is expected to grow by 4.3%, according to Thomson Reuters estimates.
“U.S. corporate earnings are forecasted to decelerate from earlier this year as the third-quarter reporting season gets underway,” Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management, wrote in a note. “Homebuilder and insurance company results are likely to reflect the aftereffects of hurricanes Harvey and Irma, while large-cap multinational companies with significant overseas operations may have benefited from U.S. dollar weakness during the quarter.”
Separately, it’s said the U.S. President Donald Trump might pick Stanford University economist John Taylor to lead the Federal Reserve after Janet Yellen’s term ends next year. Appointing Taylor, an advocate of a rules-based approach to interest rate policy, as the chair of the central bank would likely see official Fed rates to go as high as at least 3.5 percent, according to some economists.
“Fed chairs have often influenced U.S. monetary policy quite considerably in the past. And I would certainly see Taylor as a candidate who would fit in this pattern,” Commerzbank analyst Thu Lan Nguyen shared with Reuters. “That makes one thing clear: should Trump nominate Taylor as Yellen’s successor the U.S. dollar would initially appreciate notably.”
Over in Europe, inflation in the U.K. spiked to 3% in September, largely due to the slump in the value of the pound in the aftermath of the Brexit referendum. Investors are concerned about the uncertainty surrounding the future trading relationship between the U.K. and EU as Brexit talks hit deadlock last week.
British Prime Minister Theresa May met European Commission President Jean-Claude Juncker in Brussels Monday in an attempt to accelerate talks but there was no sign of the meeting resulting in a breakthrough.
