While you were sleeping: Microsoft lifts Dow

Thursday 21st July 2016

Wall Street moved higher, setting fresh records, as better-than-expected earnings from Microsoft and Morgan Stanley underpinned optimism about the outlook for corporate profits.

In 3.08pm trading in New York, the Dow Jones Industrial Average added 0.3 percent, while the Nasdaq Composite Index climbed 1.1 percent. In 2.53pm trading, the Standard & Poor’s 500 Index gained 0.5 percent.

A jump in Microsoft shares, last up 6.2 percent, spearheaded the rise of the Dow. Also advancing were shares of Cisco and those of Intel, recently up 2.2 percent and 1.4 percent respectively.

"Only two companies are setting the tone of enterprise computing, Microsoft Azure and Amazon AWS," Trip Chowdhry, managing director of Global Equities Research, referring to Amazon.com's web services unit, told Reuters.

"These are the only two initiators in the whole enterprise space that are going to see growth in excess of 80 percent year-over-year for at least two or three years,” Chowdhry noted.

Shares of Morgan Stanley rose, last up 1.3 percent, as the company posted quarterly profit that exceeded estimates amid an surprise increase in revenue from fixed-income trading. It also reported a decline in compensation costs.

“There was a general overreaction to the underperformance” of the fixed-income business last year and through the first quarter, Morgan Stanley CEO James Gorman said on a conference call, according to the Wall Street Journal. “Yes, it’s a good number this quarter. Are we shocked by it? Not really.”

So far US corporate earnings have bolstered sentiment about a stock market trading at record highs.

“Much of the data coming in and earnings announcements have been better than expected," Quincy Krosby, a market strategist at Prudential Financial in Newark, New Jersey, told Bloomberg. "The market is looking for clarity that companies are more positive about the second half of the year. We’ve been in earnings recession for so many quarters we’re now thinking about earnings as whether they’re ‘less bad.”’

Europe’s Stoxx 600 Index finished the session with an advance of 1 percent from the previous close, bolstered by better-than-expected earnings including from SAP. The UK’s FTSE 100 index increased 0.5 percent, France’s CAC 40 index rose 1.2 percent while Germany’s DAX index rallied 1.6 percent.

Shares of Volkswagen rallied 6 percent after the company posted first-half earnings that bettered expectations.

Meanwhile, Turkey’s lira sank to a record after S&P Global Ratings downgraded the country’s debt to BB with a negative outlook, down from BB+ with a stable outlook. On Monday Moody’s Investors Service put Turkey on review for a downgrade.

“The market was focused on Moody’s possible action, but S&P was the first to downgrade,” Regis Chatellier, an emerging-markets credit strategist at Societe Generale SA in London, told Bloomberg. “It’s difficult to maintain an investment grade status in these conditions.”

BusinessDesk.co.nz

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