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Stocks Jump After Surprise Bank of Japan Move

Jeremy Glaser

U.S. Market
Stocks jumped today after the Bank of Japan surprised markets by announcing a large new stimulus program.

To combat slowing growth and low inflation, the Bank of Japan unexpectedly announced today that it is expanding the size of its asset purchase program by 30 trillion yen to a total of 80 trillion. The move pushed the Nikkei Stock Average up nearly 5% to its highest levels in seven years.

Consumer spending was down a seasonally adjusted 0.2% in September. Economists had expected an increase of 0.1%. Incomes were up 0.2% in the period. Inflation looked tame, with the PCE price index rising only 1.4% year-over-year.

The Chicago PMI, which measures the strength of the Midwest manufacturing sector, rose to 66.2 in October from September’s reading of 60.5. The index is now at the highest level in a year.

Consumer sentiment rose in October according to the Reuters/University of Michigan survey. The reading of 86.9 is up from the preliminary October reading of 86.4 and ahead of expectations. Sentiment is now at the highest level since July 2007.

At midday the Dow, S&P 500, and Nasdaq were up 0.9%, 1.0% and 1.3% respectively.

Stocks on the Move
Shares of Exxon Mobil (XOM) were up 1.6% this morning after the firm’s earnings came in ahead of expectations. The firm said they earned $1.89 a share in the quarter ahead of the $1.79 a share they earned in the year-ago quarter and estimates of $1.71 per share. Revenue was down 4.3% in the quarter as production fell 4.7%.

Chevron (CVX) also reported better-than-expected results. The firm said it earned $2.95 a share in the quarter, well ahead of the $2.53 a share that was forecast and the $2.57 they earned in the year-ago quarter. Shares rose over 1% on the report.

Decelerating traffic trends in the U.S. are dominating the headlines following Starbucks' (SBUX) fiscal fourth-quarter update. Management attributed the soft segment transaction trends (up 1%) on tepid bricks-and-mortar retail industry traffic--supported by trends across our retail and e-commerce coverage universe--and not throughput or competitive reasons. Despite the U.S. traffic softness, the Americas segment's profitability remains strong, with operating margins improving 260 basis points to 24.4% through operating leverage and supply chain improvements. Shares were down 2.3% at midday.

LinkedIn (LNKD) shares soared over 12% after the firm reported third quarter results which were impressive on almost all measures. Top-line revenue grew nearly 45%, as all three segments (Talent Solutions, Marketing Solutions, and Premium Subscriptions) all posted solid growth. Talent Solutions continues to represent the bulk of the company's revenue, coming in at 61% of the total. Adjusted EBITDA margins reached 27% for the quarter as well, a peak over the past several years, although we note this metric excludes stock-based-compensation, which also reached a high at 14.6% of GAAP revenue (and fully diluted share count grew by nearly 6% as well).

Expedia (EXPE) reported third-quarter results late Thursday. Gross bookings continued to grow at a rapid pace, climbing 29% year over year, similar to the second quarter’s rate; domestic growth again outpaced international 35% versus 22%. Adjusted EBITDA margins fell slightly in the quarter to 23.9% from 24.2% last year. Shares rose over 5% on the report.

Foreign Markets
Asian markets rose after the Bank of Japan’s announcement. The Nikkei 225 soared 4.8%, while the Shanghai Composite and Hang Seng each rose 1.2%.

European shares were also higher on the day. In late trading, the Paris CAC, Germany’s DAX and the FTSE 100 were up 2.5%, 2.4% and 1.2% respectively.