Dow scales highs on debt ceiling movement
US stocks rose on Friday, helped by news that Republicans might give way to a short-term rise of the debt ceiling to avoid a new crisis, but poor earnings from Intel pulled the Nasdaq lower.
At the closing bell the Dow Jones Industrial Average was up 53.68 points, or 0.4 per cent, to 13,649.70. The broad-based S&P 500 added 5.03 points, or 0.3 per cent, at 1485.97.
But the tech-heavy Nasdaq Composite ended down 1.29 points, or 0.04 per cent, at 3129.34, dragged lower by chipmaker Intel, which sank 6.3 per cent after a poor fourth quarter, with a 31 per cent drop in profit and a lowered forecast for this year.
SPI futures rose 17 points to 4757, pointing to gains at the start of local sharemarket trade on Monday. The Australian dollar, meanwhile, slipped a bit more than a quarter of a cent to $US1.0510 in offshore trade.
The Dow and S&P 500 ended at their highest levels since December 2007. For the week, the Dow ended up 1.2 pe rcent, the S&P 500 ended up 0.9 per cent and the Nasdaq ended up 0.3 per cent.
‘‘It’s a bonbon market,’’ said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. ‘‘We’ve had little pleasant packets of surprises as these corporations keep coming through. I don’t think the box’s finished. Yet you need to remember that the market is near a five-year high and the economy is recovering at a subpar rate.’’
Equities rebounded from their lowest levels of the day as Majority Leader Eric Cantor of Virginia said in a statement that members of Congress won’t be paid if the House or Senate doesn’t pass a budget by the end of the proposed three-month debt-limit increase.
The Treasury Department has said the US will exceed its $US16.4 trillion borrowing authority sometime from mid- February to early March. Stocks fell earlier as consumer confidence in the US unexpectedly dropped in January.
The CBOE Volatility index, Wall Street's so-called fear gauge, fell 8.2 per cent. The VIX usually moves inversely to the S&P 500 as it is used as a hedge against further market decline.
Morgan Stanley was the latest Wall Street bank to report strong results. Its better-than-expected earnings followed similar report cards from Goldman Sachs and JP Morgan Chase earlier in the week.
Shares of Morgan Stanley shot up 7.9 per cent to $USS22.38. It reported a fourth-quarter profit after a year-earlier loss, helped by higher revenue at the bank's institutional securities business.
But Friday's rise was held back by shares of Intel, which slumped 6.3 per cent to $US21.25 a day after it forecast quarterly revenue below analysts' estimates and announced plans for increased capital spending amid slow demand for personal computers.
Another factor that has been weighing on the market before a three-day weekend is uncertainty about the federal debt limit and spending cuts that could hamper US growth. US markets will be closed on Monday for the Martin Luther King Jr. holiday.
also reporting stronger-than-expected earnings on Friday was General Electric, whose shares rose 3.5 per cent to $US22.04.
Overall, S&P 500 fourth-quarter earnings are forecast to have risen 2.5 per cent. That estimate is above the 1.9 per cent forecast from a week ago but well below the 9.9 per cent fourth-quarter earnings forecast from Oct. 1, the data showed.
Economic data from China also provided some support to the market, though the focus remained on US corporate earnings. China's economy grew at a modestly faster-than-expected 7.9 per cent in the fourth quarter, the latest sign the world's second-biggest economy was pulling out of a post-global financial crisis slowdown which saw it grow in 2012 at its weakest pace since 1999.
Despite the gains by Morgan Stanley, financial stocks sagged as Capital One Financial reported disappointing profit. Capital One slumped 7.5 per cent to $US56.99, while the KBW bank index slipped 0.3 per cent.
Volume was roughly 6.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.