U.S. Stocks Bounce Back on Earnings, Budget Vote: Markets Wrap

(Bloomberg) -- Most U.S. stocks climbed amid a raft of robust earnings reports, speculation about the Federal Reserve’s next leader and congressional action on taxes.

The S&P 500 Index rebounded from yesterday’s drop as results from Twitter Inc. to Ford Motor Co. topped estimates. Biotechnology shares buckled, pulling the Nasdaq 100 Stock Index lower, after Celgene Corp.’s cut to its forecast sent drugmakers tumbling. The dollar rose to the highest in 15 weeks, while oil hovered above $52 a barrel. 

Amazon.com Inc. surged more than 7 percent, Alphabet Inc. jumped 4 percent and Microsoft Corp. was little changed as of 4:20 p.m. in New York, after the trio of tech giants reported quarterly results.

The latest batch of earnings underscored the strength in the American economy a day before investors get the first reading on gross domestic product for the third quarter. UPS Inc. boosted revenue per package ahead of the crucial holiday season, and Twitter added more monthly users.

“That was a nice change of pace from yesterday, where we had that slight sell-off in the markets due to some bad earnings,”  Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Wisconsin, said by phone. “And I think that’s actually a positive thing, that earnings still matter.”

Bank shares jumped after House Republicans adopted a budget resolution unlocking a process to cut taxes by the end of the year. President Donald Trump continued to string out his decision on the next Fed leader, giving mixed signals on his preference. 

“Big step today, with the House passing the Senate version of the budget. So that’s another step towards having potentially some form of tax reform done,” Walter Todd, chief investment officer at Greenwood Capital Associates, said by phone. “The Fed chair -- things change everyday in terms of who is in first place, so we’ll see what happens in the next week or so on that.”

In Europe, ECB President Mario Draghi provided details on the central bank’s plan to reduce stimulus, while promising to maintain near-zero rates for as long as necessary. The euro fell and German bunds rose after the ECB said it will extend bond buying at 30 billion euros through next September. 

“It was roughly in line with expectations, the only difference was perhaps in the tone of the commentary, where he left open the door of perhaps doing more if we must,” Simona Mocuta, State Street’s senior economist, said by phone. “That’s where some market participants were perhaps surprised.”
Elsewhere, South Africa’s rand extended its decline amid worries of a rating downgrade after the country’s finance minister on Wednesday signaled more borrowing. Asian stocks were mixed.

Terminal users can read more in our Markets Live blog.

These are some of the key events coming up:

• Major earnings after the bell include Microsoft, Alphabet and Amazon -- the three have a combined market cap of more than $1.5 trillion.
• Other earnings include Expedia.com, Gilead and Mattel. Merck and Exxon Mobil report before the open Friday.
• The advance reading on U.S. third-quarter GDP is due at 8:30 a.m. Friday in Washington. Economists surveyed by Bloomberg expect growth of 2.6 percent.
• President Donald Trump has said he’ll reveal his choice to lead the Fed by Nov. 3. The Fed’s next rate decision is on Nov. 1, with economists expecting the central bank to keep rates at 1.25 percent.

And here are the main moves in markets:

Stocks

• The S&P 500 Index climbed 0.13 percent Thursday in New York; the Dow Jones Industrial Average rose 0.31 percent; the Nasdaq 100 fell 0.28 percent.
• The Stoxx Europe 600 Index increased 1.1 percent.
• The MSCI All-Country World Index fell 0.08 percent.

Currencies

• The Bloomberg Dollar Spot Index increased 0.7 percent.
• The euro fell 1.4 percent to $1.1648.
• South Africa’s rand fell 1.4 percent to 14.246 per dollar.
• The British pound declined 0.8 percent to $1.315.

Bonds

• The yield on 10-year Treasuries increased three basis points to 2.46 percent.
• Germany’s 10-year yield declined seven basis points to 0.42 percent.
• Britain’s 10-year yield fell two basis points to 1.384 percent.

Commodities

• West Texas Intermediate crude climbed 0.9 percent to $52.67 a barrel.
• Gold dipped 0.8 percent to $1,267.66 an ounce.
• Copper fell 0.3 percent to $6,986 a metric ton.

--With assistance from Eddie van der Walt

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn

©2017 Bloomberg L.P.