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While you were sleeping: Boeing rallies, GE sinks

Thursday 26th April 2018

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Wall Street rose as investors parsed the latest corporate earnings such as from Boeing while also assessing the impact of climbing US Treasury yields on the outlook for economic growth.


The yield on the 10-year Treasury note rose two basis points to 3.02 percent, a four-year high. It is on track to close above 3 percent for the first time since New Year’s Eve 2013, and for just the second time since 2011, according to Bloomberg.  


“We’re going to have to continue this back and forth because the question is going to be throughout the year whether or not and at what level are rates too high for the economy,” Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, told Bloomberg.


In 3.16pm trading in New York, the Dow Jones Industrial Average rose 0.5 percent, while the Nasdaq Composite Index added 0.2 percent. In 2.01pm trading, the Standard & Poor’s 500 Index added 0.4 percent.


The Dow moved higher, after having fluctuated between gains and losses earlier in the session, as rallies in shares of Boeing and those of Exxon Mobil, recently up 4.8 percent and 1.6 percent respectively, outweighed slides in shares of General Electric and those of Coca-Cola, recently down 4.4 percent and 1.6 percent respectively.


Shares of Boeing climbed after the plane maker posted results that exceeded expectations and upgraded its full-year earnings outlook.  


“With earnings reports that are coming out, the focus is on the forward guidance for where the interest rate environment is going,” William Norris, chief investment officer at CIBC Bank USA, told Reuters. 


“Investors are seeing a lot more cross-currents impacting the markets,” according to Norris, adding, “we knew that earnings were going to be very good and people are looking beyond the first quarter.”


Meanwhile, shares of General Electric dropped after Moody’s revised its outlook for the company’s credit ratings to negative.


“The first quarter was a good start to executing on this plan and our goals for 2018,” GE said in response to Moody’s negative outlook, according to Bloomberg. “We continue to have a sound liquidity position, including cash and operating credit lines.”


Investors will eye the latest results of Facebook, set to report after the market closes, following a scandal surrounding privacy breaches of its users’ data. 


“There’s pending regulation, we don’t know how exactly it’s going to play out and there’s a lot of uncertainty,” Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh, told Reuters.


In Europe, the Stoxx 600 Index finished the day with a 0.8 percent drop from the previous close. Germany’s DAX Index tumbled 1 percent, while the UK’s FTSE 100 Index fell 0.6 percent and France’s CAC40 Index gave up 0.6 percent as well.


Some see value in the region’s equities which have trailed gains on Wall Street.


“The US equity market remains richly valued, particularly relative to European markets,” Marcus Morris-Eyton, a London-based fund manager at Allianz Global Investors, told Bloomberg. “We continue to see more valuation upside in Europe, where valuations are less stretched and the earnings recovery is less advanced.”



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