US equities enjoyed their best week in months as buying fever returned to the market following a month-long swoon over solid earnings reports and also due to easing anxiety about the Ebola virus outbreak.
The S&P 500 jumped 77.82 points (4.12 percent) to 1,964.58 on Friday to post its biggest weekly increase in percentage terms since late 2012, while the Dow Jones Industrial Average closed 425 points (2.59 percent) up at 16,805.41 and the tech-rich NASDAQ Composite Index leaped 225.28 (5.29 percent) to 4,483.72.
The gains snapped a four-week skid that had dropped some leading indices by about 10 percent — a decline considered a market correction — and the week’s trade showed that the market’s penchant for buying the dip has been restored, at least for the time being.
“Some say: ‘That’s the biggest correction I’ve seen in 2014, I’m buying now,’” Wunderlich Securities Inc chief market strategist Art Hogan said. “The money waiting on the sideline sees it as an opportunity.”
Earlier in the month, market sentiment had at times veered near panic over worries about slowing economic growth in Europe and China and, more recently, the Ebola outbreak.
However, analysts pointed to a number of recent key data points that have been positive, including a euorozone purchasing managers’ index of business activity, which edged up to 52.2 this month from a 10-month low of 52 last month.
“Even though the numbers still weren’t very good, they allowed European economists to dismiss the risk of a recession, at least for this quarter,” FTN Financial chief economist Chris Low said.
Low said that Chinese growth figures, while also lackluster, came in better than expected, while worries that US retail sales could “collapse under the weight of some kind of Ebola panic also subsided this week.”
Corporate earnings reports were generally “good enough,” he added.
Among the better performers in terms of earnings, Apple Inc finished the week at an all-time high after fiscal fourth-quarter earnings jumped 13 percent to US$8.5 billion on soaring sales of its newest iPhone models.
Meanwhile, Dow member Microsoft Corp’s earnings bested expectations following strong sales from its Xbox consoles and Internet “cloud” services for enterprises, fortifying confidence in recently installed chief executive Satya Nadella.
Airlines also prospered this week, as giant carriers American Airlines Inc and United Airlines Inc, among others, benefited from strong consumer demand and lower fuel prices. Industry officials also expressed confidence at the sector’s ability to manage the Ebola risk.
However, not all the week’s reports were standouts:
Perhaps the biggest major laggard was IBM Corp, which reported its 10th consecutive quarter of lower revenues as “Big Blue” continues to struggle with its effort to shift away from low-return commodity products and toward growing sectors, such as data analysis and cloud computing.
IBM shares tumbled 11 percent since the company’s earnings report was released on Monday.
Amazon.com Incwas another underperformer this week, as shares sank 8.3 percent after the online retailer’s third-quarter loss rose 10-fold to US$437 million due to the costs of product launches including new phones, tablets and television programs.
Earnings season continues next week with reports due from Pfizer Inc, DuPont Co, ExxonMobil Corp and Facebook Inc, among others.
The highlight on the calendar is the US Federal Reserve’s two-day monetary policy meeting that is to open on Tuesday.
The Federal Open Market Committee is widely expected to announce the end of the central bank’s asset-purchase program and keep the federal funds interest rate near zero, where it has been since late 2008.
The upcoming week’s economic data releases include the first estimate of third-quarter economic growth and the Conference Board Inc’s consumer confidence index for this month.
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