While you were sleeping: Alcoa lifts mood

Wednesday 14th January 2015

Wall Street rose after better than expected earnings from Alcoa eased concern that the slump in oil prices and flagging economies outside of the US had shrunk American corporate profits.

In afternoon trading in New York, the Dow Jones Industrial Average rose 0.80 percent, the Standard & Poor’s 500 Index gained 0.57 percent, while the Nasdaq Composite Index climbed 0.96 percent.

Gains in shares of Visa and those of IBM, last up 1.7 percent and 1.5 percent respectively, led the Dow higher.

Alcoa reported sales and profit for the fourth quarter that exceeded estimates. Shares of Alcoa last traded 1.4 percent lower at US$15.95, the stock had risen as high as US$16.53 earlier in the session.

“There was such a negative feeling about implications of lower oil and economic growth on earnings and we’re seeing earnings at least initially with Alcoa are putting some cold water on that assumption,” Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, told Bloomberg News. “We’re going to have to see if this continues but I don’t think anyone was expecting this right off the bat.”

Fourth quarter earnings are expected to show growth of 3.7 percent over the year-earlier period, according to Thomson Reuters data, down from the 11.2 percent growth expected on October 1.

"Analysts really have knocked their estimates down pretty dramatically over the last three months for this quarter, my sense is companies are going to beat but expectations are as low as a limbo stick right now," Jack Ablin, chief investment officer at BMO Private Bank in Chicago, told Reuters.

There was further confirmation of strength in the US economy. The National Federation of Independent Business said its small business optimism index rose 2.3 points to 100.4 in December, the highest reading since October 2006.

"There are concerns about global growth, but the fundamentals for the US economy are very solid and what's going on overseas should only be a minor drag,” Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh, told Reuters.

Meanwhile, shares of Apple were more than 1 percent higher after Credit Suisse Group upgraded its rating on the stock to outperform, from neutral, and said the company could return another US$200 billion to shareholders.

Oil slid, pushing West Texas Intermediate futures as low as US$44.20.

In Europe, the Stoxx 600 Index ended the session with a 1.4 percent advance from the previous close. The UK’s FTSE 100 Index added 0.6 percent, France’s CAC 40 Index rose 1.5 percent, while Germany’s DAX Index jumped 1.6 percent.

The euro sank to the lowest level in nine years amid expectations the European Central Bank will move soon to add extra stimulus to bolster the euro-zone’s languid economy.

The euro slid as low as US$1.1753, the weakest level since 2005, according to Bloomberg.

“Investors with long dollar positions will want to keep them and target recent lows in the euro," Niels Christensen, FX strategist at Nordea, told Reuters.

BusinessDesk.co.nz

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