A good start. The three major US stock indices ended with significant gains on Tuesday as third-quarter income reports began to roll in. Positive results from blue-chip companies such as
Johnson & Johnson
(UNH) drove stocks higher. The renewed hope of a Brexit deal may have helped boost the sentiment. In today's After the clock we check …
- the latest income reports from the largest companies;
- take a closer look at Wall Street expectations for Q3 results;
- and look at global economic forecast is reduced to record low since the financial crisis.
Earnings Trump GDP Data
Stocks jumped higher on Tuesday as investors embraced the third-quarter revenue season with optimism. The
Dow Jones industrial average
has gained 237.44 points, or 0.89%, to close at 27,024.80. The
is up 29.53 points, or 1.00%, to complete at 2995.68, and
rose 100.06 points, or 1.24%, to end at 8148.71.
Companies started the reporting season on a positive note. All S&P 500 companies that reported today – except
Goldman Sachs Group
(WFC) – beat consensus expectations for third quarter earnings per share.
But even the two big banks that missed views saw their shares approach with gains. The financial sector has been in favor for most of the year, and the banks have some of the lowest valuations in the stock market. Investors can finally be gravitated to the cheaply traded sector and bet on its decline. For Wells Fargo, investors are looking forward to a turnaround under Charles Scharf, which will take up the CEO position on October 21. Wells Fargo also has a substantial stock repurchase program and one of the highest dividend yields among peers of 4%.  Other non-bank reports including asset manager
J&J and UnitedHealth saw the stock close on Tuesday with gains of 2.4%, 1.6% and 8.2% respectively.
Amid a declining global economy and trade-related uncertainties, Wall Street expects overall earnings for S&P 500 companies to come lower than last year for a third quarter, according to FactSet data. This may mark the first nine months of declining earnings since the period from the fourth quarter of 2015 to the second quarter of 2016. According to FactSet, analysts are looking for S&P 500 earnings to fall 4.6% in the third quarter compared to the same period last year .
The International Monetary Fund on Tuesday cut its global economic forecast again for the year to the slowest pace since the global financial crisis. Growth in 2019 is now expected at 3%, revised by 0.3 percentage points from the previous estimate in April. Estimated growth in 2020 was also revised by 0.2 percentage points to 3.4%. The report estimates that US-China trade tensions will reduce the level of global gross domestic products by 0.8% by 2020.
The latest outlook for the downturn sets the stage for this week's annual IMF meetings that bring together global finance ministers and central bankers in Washington, D.C., to discuss the health of the world economy and their economic priorities. "At 3% growth, there is no room for political error and an urgent need for policy makers to support growth," said IMF Research Director Gita Gopinath in a statement.
The US-China partial trade agreement – announced last Friday – seems so overwhelming to investors, as details have not yet been hammered out and questions about key structures remain off the table.
Trustees, for one, are not so euphoric. According to the latest Bank of America Merrill Lynch Global Fund Manager Survey, the cash level of their portfolios has risen to 4.0% in October, hitting the highest reading so far this year and above the survey's historic average of 3.6%.
Write to Evie Liu at email@example.com