US stocks pushed higher for the third week in a row on passable earnings, big merger announcements and rising confidence the US Federal Reserve would keep interest rates low.
Trade cooled somewhat compared with the torrid gains of the prior week, when the S&P 500 produced its biggest weekly gain this year. Nonetheless, this month’s rally remained alive and well after the first major week of third-quarter corporate earnings.
The Dow Jones Industrial Average climbed 131.48 points (0.77 percent) to 17,215.97.
The broad-based S&P 500 rose 18.22 (0.90 percent) to 2,033.11, while the tech-rich NASDAQ Composite Index advanced 56.22 (1.16 percent) to 4,886.69.
Some analysts see signs the rally is losing steam.
“The stock market is up, but you can sense that investors are becoming a little bit guarded or the market is starting to struggle,” Hugh Johnson of Hugh Johnson Advisors said.
“And I think that’s going to continue to be the case because we’re working through a very tough earnings season,” he added.
However, Marblehead Asset Management director Mace Blicksilver said the market’s performance after only mixed earnings suggests a “new bull market” could be emerging.
Investors took a sunny approach to earnings, bidding up banking shares even as Goldman Sachs and JPMorgan Chase missed analyst profit forecasts and the sector in general reported lower revenues.
Results from JPMorgan Chase, Bank of America and Wells Fargo showed lending to small businesses and consumers picked up, in a positive sign for the economy. Yet bank executives offered a muted outlook, with Bank of America chief executive Brian Moynihan remarking on “a tough revenue environment due to low interest rates and a sluggish economic recovery.”
General Electric also got a lift despite reporting lower revenues as chief executive Jeff Immelt brushed aside concerns about an industrial recession and said its business in China was “still pretty good.”
However, streaming television giant Netflix slumped after reporting disappointing new US subscriber numbers and slightly lower profits than expected in the third quarter.
The week’s ugliest reaction came in response to a Wal-Mart Stores investor presentation that projected earnings in 2017 would fall by 6 to 12 percent due to heavy investments in higher employee wages and the build-out of e-commerce infrastructure.
Wal-Mart plunged 10 percent on Wednesday after the presentation and kept dropping after that.
The Wal-Mart outlook underscored worries that the retail behemoth is a “dinosaur fighting the new economy” as embodied by Amazon and other online vendors, Meeschaert Capital Markets president Gregori Volokhine said.
Other highlights this week included two mega mergers. The US$67 billion purchase of data-storage giant EMC by computer maker Dell was the largest technology deal ever.
That was followed by the US$122 billion takeover of British brewing company SABMiller by Anheuser-Busch InBev. The deal is expected to be closely scrutinized by antitrust authorities and to result in the sale of SAB’s stake in a MillerCoors joint venture to Molson Coors.
Analysts also said gains were propelled by rising confidence the Fed would hold off on any interest rate increases in the wake of lackluster US data, including a 0.1 percent drop in US retail sales last month.
Next week’s calendar includes data on US housing starts, as well as a heavy batch of earnings from a broad range of companies, including Boeing, Coca-Cola, General Motors, Google and Microsoft.
Analysts are also looking to fresh economic data out of China, including third-quarter growth figures.
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