US equities climbed Wednesday, rallying into the end of a red October.
The S&P 500 is down about 7% in October and 7.8% from its September intraday high of 2,940.91 points. The Dow fell 6.8% from its peak of 26,951.81 points, which it reached just earlier this month. The Nasdaq is down 10% from its August high of 8,133.3 points and slipped 9% in October.
The past month has been turbulent for equity trading, with the S&P 500 ending nearly three-quarters of its sessions lower. The index closed higher two sessions in a row for the first time this month on Wednesday.
“While upbeat earnings numbers have helped the US stock market find its feet again in the past couple of days, the bigger picture is that the S&P 500 has tumbled in recent weeks despite healthy earnings,” Capital Economics’ Oliver Jones said. “We think that this reflects worries about the outlook for them, which in our view are likely to intensify as actual earnings growth slows sharply next year.”
STOCKS: GM, Yum Brands post strong results, Kellogg flounders
Kellogg Co (K) shares tumbled after the breakfast food maker slashed its full-year profit outlook due to increased advertising spending and higher distribution costs. The company expects full-year adjusted earnings per share to rise about 7% to 8%, versus the previous guidance of 11% to 13%. Sales in Kellogg’s US morning foods unit, which includes cereals such as Froot Loops and Corn Flakes, declined 1.3% in the third quarter. The company had recalled 1.3 million cases of Honey Smacks in June on account of a potential salmonella contamination. The stock slid 8.93% to $65.44 per share at market close.
General Motors (GM) posted third-quarter results that exceeded Wall Street’s expectations. Adjusted earnings came in at $1.87 per share on net revenue of $35.8 billion, beating estimates of $1.25 per share on net revenue of $34.85 billion. Net income came in at $2.5 billion, versus last year’s loss of $2.98 billion. The auto company also said it expects profit for the year to reach the high end of its previously issued guidance, with the potential for earnings to beat $6.20 per share. Shares of GM rose 9.06% to $36.58 each at the end of trading.
Facebook (FB), which reported after the bell Tuesday, posted lukewarm results following weak second quarter results in July. The company beat on earnings per share while missing narrowly on revenue and global daily active users. Company executives emphasized the company’s efforts to shift focus from newsfeed to videos and stories, with CEO Mark Zuckerberg calling 2019 a year of “significant investment” for the company as it works to monetize the newer features. Shares of Facebook rose 0.14% to $152 each at the end of trading Wednesday.
Yum Brands (YUM), the parent company of KFC, Pizza Hut and Taco Bell, beat consensus expectations on both the top and bottom lines and posted better-than-expected sales for international markets. Same-store sales, a key metric for restaurant companies, grew 2% for Yum in the third quarter, outpacing the 1.8% growth analysts expected. Shares of Yum rose 4.58% to $90.39 per share Wednesday.
Shares of eBay (EBAY) rose after the company reported earnings that exceeded consensus expectations. Earnings were 56 cents per share, versus expectations of 54 cents per share. Revenue came in at $2.65 billion for the third quarter, in-line with expectations. The e-commerce company sees earnings between 67 cents and 69 cents per share in the fourth quarter, versus the 67 cents analysts expected. Gross merchandise, measuring total dollar value for items sold on the platform, came in below estimates, totaling $22.7 billion in the third quarter versus the $23.2 billion predicted by analysts. Shares of eBay rose 5.87% to $29.03 each at the end of trading Wednesday.
Denny’s (DENN) said it intends to sell most of its company-owned stores over the next year-and-a-half, sending shares soaring Wednesday afternoon. The company plans to sell 90 to 125 restaurants to bring total franchised locations to a target range of between 95% and 97%. Currently, about 90% of the chain’s 1,715 units are franchises. The boost in franchised locations will allow Denny’s to make more in royalty revenue and cut costs from operating individual restaurants. Shares of Denny’s surged 22.61% to $17.35 each as of market close Wednesday.
ECONOMY: US private sector added 227,000 jobs in October
The US added 227,000 non-farm private sector jobs in October, according to a report from the ADP Research Institute Wednesday. This beat average economist expectations of 187,000 job additions and outpaced last month’s downwardly revised 218,000. Service-providing jobs were up 189,000 for the month, and goods-producing jobs were up 38,000.
“Despite a significant shortage in skilled talent, the labor market continues to grow,” Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said in a statement. “We saw significant gains across all industries with trade and leisure and hospitality leading the way. We continue to see larger employers benefit in this environment as they are more apt to provide the competitive wages and strong benefits employees desire.”
ADP’s release gives a preliminary snapshot of employment conditions ahead of official results from the Department of Labor Friday, but the two sets of reports can sometimes offer disparate results. That’s because the DOL’s figures include only those paid during the survey period, while the ADP survey considers anyone on the payroll as employed – meaning that ADP latest results didn’t necessarily capture any hit from Hurricane Michael.
“We’d be very surprised to see Friday’s headlines as strong as the ADP data, but with hurricanes making landfall in the survey weeks in both September and August…we’re braced for anything,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote in a note.
The Labor Department’s employment cost index rose 0.8% in the third quarter, exceeding consensus estimates of 0.7%. Wages and salaries increased 0.9%, which also topped expectations of 0.5%. This marks a 3% increase in wages and salaries over the last year. Overall compensation costs for civilian workers ticked up 2.8% for the 12 months ending in September.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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