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Stocks Tip Higher as Big-Name Earnings Are All Over the Board

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October 22, 2015

Broad stock indexes have a shot at the first higher finish in three days if early indicators hold. That’s after Wednesday’s deal-driven and IPO-fueled early gains fizzled by the final bell. Wednesday’s turn south was led by losses in the S&P 500’s (SPX) health care sector, and may not have reflected broad-market sentiment.

If so, that could set the course for a mild Thursday rebound even as a busy earnings week continues with mostly mixed results. Global diversions are also in play. Asian markets gained as Chinese stock averages responded with a mild bounce to Wednesday’s unexpectedly sharp retreat. Financial media reported central bank liquidity moves likely helped restore short-term market confidence there. According to those reports, the People’s Bank of China injected the equivalent of $16.6 billion through medium-term lending facilities.

China’s isn’t the only overseas market under closer watch in the U.S. All eyes turn to European Central Bank President Mario Draghi’s policy meeting. The ECB today opted to leave its stimulus policy untouched but Draghi said they’ll revisit the issue in December. That rhetoric was in line with industry economists’ expectations. They generally expected Draghi to keep the door open to more stimulus, but stop short today of announcing any new policy measures. European stocks remained higher in light of that open-minded stance.

SPX-stock-chart

FIGURE 1: MIXED EARNINGS TEST SPX.

The S&P 500 (SPX), charted on the new-look thinkorswim® platform, closed below 2020 Wednesday and is tipping higher Thursday amid mixed earnings news. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

CAT Cuts Outlook. Caterpillar (CAT) reported a 64% drop in Q3 profit on weaker demand from global mining and energy firms. Those results pushed the company to slash its full-year profit estimates. CAT is now expecting profit of about $4.60 a share, excluding restructuring costs, for 2015. It had previously forecast an adjusted profit of $5 per share. CAT already cut its revenue view and announced job cuts in September so the quarter likely surprised few on Wall Street. As for other industrials, Dow Chemical (DOW) shares gain following its earnings and buyback news; 3M (MMM) beats the Street view with its profit results but cuts its outlook and announces job reductions.

McDonald’s Scores Turnaround Points. McDonald's (MCD) shares are early gainers after the fast-food giant beat profit and sales expectations. One key metric, global same-store sales increased 4%, better than a Street-forecast 1.7% growth. According to management: "Third quarter marked an important step in the company's global turnaround—the reorganization of our business from a geographically focused structure to business segments that combine markets with similar characteristics and opportunities for growth. As we begin fourth quarter, comparable sales are expected to be positive in all segments." The stock has climbed just over 9% year to date, outpacing the Dow Jones Industrial Average’s 3.7% drop in the same period.

Will Amazon Deliver? Amazon.com (AMZN) is on the busy post-close earnings calendar. Thomson Reuters’ surveyed analysts, on average, expect AMZN Q3 revenue up 21% to $24.9 billion compared to a year earlier. They expect a loss-per-share of $0.12. That’s typical for AMZN, which has heavily reinvested in the firm. In fact, in the past 14 quarters, only eight have been in the black. And yet AMZN has met or outpaced Wall Street expectations in three of the last four quarters, including Q2’s upside surprise.

Good Trading,

JJ

@TDAJJKinahan

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