The US stock market closed out its best week in nearly two years on a positive note today, helped by strong quarterly earnings from Microsoft and other big US companies.
Investors were able to set aside dismal third-quarter results from Amazon. The giant online retailer’s shares took a beating, but that wasn’t enough to drag the rest of the market down.
After weeks of speculation over the fate of Europe’s economy, Ebola fears and plunging oil prices, investors were able to get back to basics. Wall Street is in the midst of one of the busiest times of the year, when companies report their quarterly results. Ultimately what drives stock prices higher is the potential for that company to earn more profits, so higher profits generally mean higher stock prices.
“What matters most to the market are earnings expectations and corporate fundamentals, and so far they’re looking pretty good,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Profits for S&P 500 companies are up 5.6% from a year ago so far this earnings season, according to FactSet, which is better than the 4.6% growth the market was looking for before the season began.
Quarterly results from Microsoft and UPS helped lift the market on Friday, but there have been other strong earnings reports all week. Caterpillar, 3M, Apple and others have all came in well above expectations.
Microsoft reported sales and profits that were well above analysts’ expectations. Cloud services, a business that Microsoft has been focusing on, also grew. Microsoft’s stock rose 1.11 dollars, or 2.5 %, to 46.13 dollars.
UPS also reported strong quarterly results and expects December shipments to be up 11% from a year ago. Many investors consider UPS a bellwether for how the US. economy is doing, particularly during the crucial holiday shopping season. UPS rose 11 cents, or 0.1%, to 100.59 dollars.
The Dow Jones industrial average rose 127.51 points, or 0.8%, to 16,805.41. The Standard & Poor’s 500 index added 13.76 points, or 0.7%, to 1,964.58 and the Nasdaq composite rose 30.92 points, or 0.7%, to 4,483.72.
With Friday’s gains, US stocks had their best week in nearly two years. The S&P 500 rose 4.1% for the week, the biggest gain since January 2013. But volatility can go both ways. Just as the market jumped sharply this week, it plunged just as sharply last week. Even with this week’s gains, the S&P 500 is still down 0.4% for October.
“We’ve seen the market sell-off and we saw people buy on the bounce, and that looks like it will continue,” said Brad McMillan, chief investment officer at Commonwealth Financial.
One company that fell well short of investors’ expectations was Amazon. The company reported a steeper-than-expected quarterly loss despite soaring sales. Investors have grown impatient with Amazon, which has been unable to deliver profits even as it gains ground as one of the world’s largest retail companies. Amazon fell 26.12 dollars, or 8%, to 287.06 dollars.
Investors are turning their focus to next week’s Federal Reserve policy meeting for hints about the future of the central bank’s bond purchases. The programme has kept long-term interest rates extremely low to keep markets fluid and to encourage investment and hiring. Recent mixed signals about the strength of the US recovery have prompted speculation that the Fed might let the programme continue for longer than previously anticipated.
Investors will also get another large batch of quarterly results from US companies next week, when 159 members of the S&P 500 index report results, including Merck, Exxon Mobil, Chevron and Visa.
The price of oil fell on Friday on further evidence of ample supplies and weak demand. Benchmark US. crude fell 1.08 dollars to close at 81.01 dollars a barrel on the New York Mercantile Exchange.
Brent crude, a benchmark for international oils used by many US. refineries, fell 70 cents to close at 86.13 dollars on the ICE Futures exchange in London. In New York, wholesale petrol fell 2.5 cents to close at 2.182 dollars a gallon, heating oil fell 1.7 cents to close at 2.482 dollars a gallon and natural gas rose 0.1 cent to close at 3.623 dollars per 1,000 cubic feet.
The price of gold rose 2.70 dollars to 1,231.80 dollars an ounce, silver rose two cents to 17.18 dollars an ounce and copper was flat at 3.04 dollars a pound.