Lawmakers struck a last-minute deal to save the world's
largest economy from a potential default on its debt, lifting the
S&P 500 and Nasdaq higher. However, dismal earnings from
tech-heavyweight IBM and banking giant Goldman Sachs dragged the
Dow marginally lower. After yesterday's gains, the S&P 500
touched an all-time high. Meanwhile, the number of Americans
filing for unemployment benefits declined in the previous week.
Most of the sectors in the S&P 500 industry groups finished
in green, led by the consumer staples and materials sectors.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) fell 0.01% to close the
day at 15371.65. The S&P 500 added 0.7% to finish yesterday's
trading session at 1733.15. The tech-laden Nasdaq Composite Index
climbed 0.6% to end at 3863.15. The fear-gauge CBOE Volatility
Index (VIX) tumbled 8.4% to settle at 13.48. Consolidated volumes
on the New York Stock Exchange, American Stock Exchange and
Nasdaq were roughly 5.52 billion shares, considerably lower than
2013's average of 6.0 billion shares. Advancing stocks
outnumbered the decliners. For 81% shares that advanced, only 17%
After a long impasse, lawmakers managed to seal a deal to reopen
the government and prevent the country from defaulting on debt.
According to the deal, government agencies will be funded till
January 15 and the debt limit will be extended till February 7.
Federal Reserve and government employees returned to work after a
partial shutdown lasting sixteen days. The bill signed by
President Barack Obama also includes back pay for furloughed
President Barack Obama said the partial government shutdown
decelerated growth of the economy. The President said: "There are
no winners here - these last few weeks have inflicted completely
unnecessary damage on our economy." "We don't know yet the full
scope of the damage, but every analyst out there believes it
slowed our growth," he added.
Dallas Fed President Richard Fisher said the central bank cannot
effectively fight high unemployment unless Congress and President
Obama "get their act together" and fix the country's fiscal
problems. Fisher said: "Kicking the can down the road for a few
months will not solve the pathology of fiscal misfeasance that
undermines our economy and threatens our future."
On the home front, the U.S. Department of Labor reported initial
claims numbers. According to the report, initial claims fell
15,000 to 358,000 from the prior week's revised figure of
373,000. This was considerably above the consensus estimate of
332,000. The four week moving average increased 11,750 to 336,500
from the previous week's revised average of 324,750. But
California continued to deal with a backlog related to computer
On the earnings front, tech-heavyweight International Business
Machines Corp. (NYSE:
) reported dismal third quarter results. The company's earnings
came in above the Street's estimate but revenue fell short of
expectations. Following the declaration of results, shares
tumbled more than 6%, hitting a two-year low, shaving of 76
points from the blue-chip index. IBM net income increased 6% to
$4 billion from $3.82 billion, in the year ago period. But what
disappointed investors is the fall in revenue, which declined 4%
to $23.72 billion from $24.75 billion.
Financial bellwether Goldman Sachs Group Inc (NYSE:
) also disappointed the Street with its quarterly numbers. The
company's third quarter earnings declined 2% due to a decline in
its revenue from its bond trading business. Goldman Sachs
third-quarter revenue tumbled 20%. Shares declined more than 2%
yesterday. On the other hand, shares of eBay Inc (NASDAQ:
) declined 4% after the company's outlook fell short of
expectations. The company's third-quarter net income increased to
$689 million from $597 million in the year ago period.
The materials sector was the biggest gainer among the S&P 500
industry groups and the Materials Select Sector SPDR (XLB) gained
1.3%. Stocks such as Monsanto Company (NYSE:
), LyondellBasell Industries NV (NYSE:
), Air Products & Chemicals, Inc. (NYSE:
), The Dow Chemical Company (NYSE:
) and FMC Corp (NYSE:
) added 0.3%, 1.4%, 0.7%, 0.6% and 1.1%, respectively.