Julex Market Weekly 10-27-2013 | Strong Earnings Drove Stocks Higher

Top Stories Last Week

• US Stocks Moved Higher on Strong Earnings

Halfway through the earning season, Most of US companies beat expectations. US stocks reached new records. In the week, S&P index rose 0.9%, and MSCI EAFE index climbed 0.6%. However, the MSCI Emerging Market Index declined by 0.9% amid increasing concerns about Chinese banks. Gold rallied 2.8%, but the SPGC commodity index dropped 2.4%. The bond markets rose as well. Barclays US Treasury index was up by 0.8%, but US high yield bonds was up 0.2%.

• Half Way through Earnings Season, US Companies Beat Earnings Expectation, but Shy of Revenue

U.S. companies are beating earnings expectations in the third quarter by a wide margin. With 228 of the S&P 500 firms reporting, the aggregate surprise for earnings per share is 4.8%. The beats are broad-based: All 10 sectors are beating expectations. Among individual companies, 63% have done so, while 19% have fallen short, according to RBC. However, revenue for S&P 500 companies has fallen short of expectations by 0.1%. Indeed, revenue has missed the Wall Street consensus in four of the last six quarters.

• US Added 148K Jobs in September and Unemployment Fell to 7.2%

The U.S. employers added 148K jobs in September. The unemployment rate fell to 7.2%, down from 7.3% in August and nearly a five-year low. Revisions to the previous two months were mixed. US firms added 193K jobs in August, better than the initial estimate. But they added only 89K in July. The labor participation rate remained at 63%, the lowest level in thirty five years.

• US Durable Goods Orders Excluding Aircrafts Fell 0.1%

Orders for a wide range of U.S.-made capital goods plummeted in September, signs that a budget battle in Washington may have held back the economy. New orders of non-military capital goods other than aircraft, an indicator of business spending plans, fell 0.1% last month. That could be a sign businesses restrained from capital spending as the fiscal debate was heating up in Washington.

• Bank of Canada Kept Interest Rates Unchanged and Abandoned Rate-Hike Talk

The Bank of Canada held its key interest rate at 1.0%, the level it has been at for over three years. In addition, the Canadian central bank abandoned an 18-month stretch of rate-hike talk in a dramatic policy shift that highlighted lower-than-expected growth and the risk of persistently weak inflation. The bank cut its growth and inflation estimates across the board. It reduced its third-quarter growth forecast to an annualized 1.8% from 3.8%; fourth quarter to 2.3% from 2.5%; and growth for 2014 to 2.3% from 2.7%.

• UK GDP Growth Accelerated to 0.8% in the Third Quarter

U.K. economic growth accelerated to its fastest pace in more than three years in the third quarter as the economic recovery continued across all main industries. GDP rose 0.8%, up from 0.7% growth between April and June and the most since the second quarter of 2010.

Top Stories to Watch This Week

• Fed Meeting

The Fed will meet this week. Most economists expect no tapering at this meeting.

• Retail Sales

US retail sales might rise 0.1% in September. US consumers are still optimistic.

• US Inflation Rate

Inflation rate in the US may remain subdued at 1.8%, below the Fed’s target.

• Bank of Japan Monetary Policy

Bank of Japan (BOJ) will keep monetary policy unchanged, according to economists’ consensus.

• US and China’s PMI

US and China’s manufacture sectors are expected to continue expansion in October.

• More Earnings Reports:

Large companies reporting earnings this week include Apple, Facebook, BP, ExxonMobil, Royal Dutch Shell, GM, and Chrysler.