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While you were sleeping: Wall St climbs on earnings, IBM bucks trend

Thursday 19th April 2018

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Wall Street moved higher as the latest corporate earnings including from Morgan Stanley bolstered amid optimism about the outlook, even as IBM shares dropped on disappointing results. 

Shares of Morgan Stanley gained after the bank posted record quarterly net income and revenues that bettered analysts’ expectations. The stock traded 0.9 percent stronger at US$53.73 as of 2.42pm in New York after rising as high as U$55.00 earlier in the day. 

"We delivered very strong results this quarter, with record revenues and net income—and an ROE above our target range," James Gorman, chief executive officer, said in a statement. "Each of our businesses performed well, with significant client engagement across our global franchise, and sales and trading a particular highlight in a more active environment.”

In 2pm trading in New York, the Dow Jones Industrial Average slipped 0.2 percent. However, the Nasdaq Composite Index rose 0.2 percent. In 1.45pm trading, the Standard & Poor’s 500 Index also gained 0.2 percent.

Shares of IBM tumbled, weighing on the Dow, after the company posted margins that failed to impress investors. 

"The bottom-line was helped by a one-time tax gain, so on an apples-to-apples basis, IBM missed the Street's profit margin expectations which will weigh on shares along with guidance," Dan Ives, analyst at GBH Insights, said in a note, CNBC reported. 

"The quarter/guidance overall we would characterise as a slight disappointment as the margin softness, in-line Strategic Imperatives number, and unchanged guidance for the year was not enough for the bulls on the name and could put some pressure on shares," according to Ives. 

The Dow fell, as slides in shares of IBM and those of Johnson & Johnson, recently down 7.5 percent and 2.2 percent respectively, outweighed gains in shares of Home Depot and those of Caterpillar, recently up 2.6 percent and 1.9 percent respectively.

Meanwhile, the Federal Reserve’s Beige Book reported noted concern about new tariffs and a potential trade war.

“Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs,” according to the Fed’s report. 

Commodities including oil, gold, copper and nickel advanced amid concern about the impact of US-imposed sanctions on Russia.

US Treasuries fell, sending yields on the 10-year note three basis points higher to 2.86 percent, the highest in more than three weeks.

In Europe, the Stoxx 600 Index finished the day with a 0.3 percent increase from the previous close. The UK’s FTSE 100 Index climbed 1.3 percent, France’s CAC40 Index added 0.5 percent, while Germany’s DAX Index eked out a 0.04 percent gain.

Shares of France’s Danone climbed after the world’s top yoghurt maker posted better-than-expected quarterly sales growth, amid strong demand for its infant nutrition brands in China and improvement in its dairy business. 

Danone's revenue increased 4.9 percent on a like-for-like basis in the first quarter, exceeding analysts' estimates. 

"We have achieved further progress in developing a more sustainable platform of growth and in the premiumisation of our offering in early life nutrition in China, broad-based growth in waters, and gradual improvement in our essential dairy and plant-based activities," Emmanuel Faber, chief executive officer, said in a statement. 

The stock closed 1.5 percent stronger in Paris. 

“The dairy and plant-based business is gradually improving just as baby-food growth is expected to slow,” Alain Oberhuber, an analyst at MainFirst Bank, told Bloomberg. “If dairy continues to go well in Europe and North America, it could help offset that slowdown.”


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