Saturday, October 12, 2013
DJ: U.S. Stocks Finish Higher As Investors Hopeful On Washington
NEW YORK--Stocks climbed Friday, with blue chips notching their first weekly gain in three weeks, as investors grew more confident that Washington would hammer out a deal to raise the nation's borrowing limit.
The Dow Jones Industrial Average gained 111 points, or 0.7%, to 15237. The S&P 500 added 11 points, or 0.6%, to 1703 to end at its highest level since Sept. 20. Both benchmarks snapped a two-week losing streak this week.
The Nasdaq Composite Index added 31 points, or 0.8%, to 3792. That index failed to end higher on the week, halting five weeks of gains.
The gains suggested investors were increasingly optimistic that a deal of some sort would emerge from Washington. On Friday, House Republicans and the Obama administration began a second day of negotiations over a plan that could extend the nation's borrowing authority for six weeks and reopen the federal government. Similar discussions Thursday ended with no agreement.
"The market is clearly rallying on expectations," said David Lafferty, chief investment strategist for Natixis Global Asset Management. "I think we will get the broad outline of a deal this weekend."
Uri Landesman, president of Platinum Partners, a hedge fund that manages about $1.25 billion, said investors appeared to be betting on a deal coming together in the coming days. "The budget talks are what's really driving the market right now."
But Mr. Landesman said he isn't betting one way or the other on a deal in Washington. He believes Friday's rally and the budget discussions in Washington are obscuring broader economic weakness that is likely to lead to a pullback later in the year. "There's a lot more risk at these prices than what's been discounted in the market," he said.
Among the biggest companies reporting Friday, the results were mixed. J.P. Morgan Chase's stock was nearly flat, recovering early losses after reporting it swung to a rare net loss in the third quarter due to hefty legal bills. The Dow component's adjusted earnings were better than expected on strength in deposit growth, credit-card spending and investment-banking results.
Wells Fargo was little changed after the nation's largest mortgage lender by loan originations reported third-quarter earnings that topped estimates but revenue that fell a bit shy, amid lower mortgage-banking revenue and a decline in its net interest margin.
Meanwhile, a reading on consumer sentiment indicated U.S. consumers turned less optimistic about the economy in early October. The Thomson-Reuters/University of Michigan preliminary October sentiment index slipped to 75.2 from an end-of-September level of 77.5, according to an economist who has seen the numbers.
The index reached 85.1 at the end of July, which had been the highest reading since before the recession.
Economists surveyed by Dow Jones Newswires had expected the early October index to fall to 75.
The yield on the 10-year Treasury note slipped to 2.682% from 2.686% late Thursday. The bond market will be closed Monday for the Columbus Day holiday.
European markets got a further lift from optimism over U.S. debt-ceiling talks, with the Stoxx Europe 600 up 0.4% after rising 1.7% on Thursday.
Oil prices were lower. Benchmark futures on the New York Mercantile Exchange were down 1% to $102.02 a barrel.
In other corporate news, Gap retreated nearly 7% after the apparel retailer late Thursday said September same-store sales declined from a year ago in all of its branded stores.
Micron Technology slumped nearly 9% on heavy volume as the memory-chip maker's fiscal fourth-quarter earnings and revenue, which were above expectations, were clouded by one-time gains resulting from the acquisition of Japan's Elpida Memory. Ahead of the results, released late Thursday, the stock had nearly tripled since the start of the year.
Doug Cote, chief market strategist at ING Investment Management, cautioned investors against trading on the news flow out of Washington, saying the biggest risk is that they "prematurely sell" if a deal isn't immediate. He said investors should remain focused on stock fundamentals, saying early third-quarter earnings reports have been positive.
"We are in third-quarter earnings season, and it's been coming out reasonably well," he said.