While you were sleeping: Financial, energy shares gain

Friday 22nd December 2017

Wall Street climbed, bolstered by gains in bank and energy stocks, on optimism corporate tax cuts will lift profits and underpin economic growth.

A Commerce Department report showed US gross domestic product grew at a 3.2 percent annualised pace in the third quarter. While the third GDP estimate was revised lower from the 3.3 percent reported last month, it remains the fastest pace since early 2015.

“You’ve got an improving economy that bodes well for loan growth along with a rising interest rate environment, and a modest regulatory relief, which makes financial stocks favourable,” Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis, told Reuters.

In 1.11pm trading in New York, the Dow Jones Industrial Average climbed 0.5 percent, while the Nasdaq Composite Index increased 0.4 percent. In 12.56pm trading, the Standard & Poor’s 500 Index gained 0.4 percent.

The US dollar gained, as did Treasuries, pushing yields on the 10-year note 1 basis point lower to 2.48 percent.

Investors are also digesting the impact of the new tax overhaul bill, which passed Congress on Wednesday.

“The impact is still a work-in-progress, tax cuts are believed to add to earnings,” Sandven told Reuters. “But the unknowns are to what extent the company behaviour changes in terms of capex policy, buybacks and wage increases.”

The Dow rose as advances in shares of Chevron and those of Goldman Sachs, recently up 3.9 percent and 2.4 percent respectively, outweighed declines in shares of Intel and those of Coca-Cola, down 1.5 percent and 0.7 percent respectively.

Bucking the trend, shares of Bed Bath & Beyond sank, trading 12.8 percent weaker as of 1.24pm, amid concern about the company’s holiday sales. Chief Financial Officer Susan Lattmann said that heavy promotions may have spurred holiday spending in November—at the expense of December sales, according to Bloomberg.

The comment suggests “business may have slowed a bit in December,” Jefferies analyst Daniel Binder said in a note to clients, Bloomberg reported. “Management is taking actions to improve sales and profitability, but it remains unclear when/how much these initiatives will begin to bear fruit.”

In Europe, the Stoxx 600 Index ended the session with a 0.6 percent increase from the previous close. The UK’s FTSE 100 Index rallied 1.1 percent, France’s CAC 40 Index advanced 0.6 percent, while Germany’s DAX Index gained 0.3 percent.

Shares of Nestle closed 1 percent stronger in Zurich. The world’s largest packaged food company said it expects to sell its US confectionery business in the first quarter of 2018, according to media reports.

“Our strategic review has led to us deciding to divest the business and a robust sale process is currently underway which we expect to conclude in Q1 2018,” a spokeswoman said on Thursday, according to Reuters.

Analysts have estimated the unit could fetch US$1 billion to US$3 billion, according to Bloomberg.

(BusinessDesk)

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