U.S. equities climbed Tuesday following a slew of third-quarter earnings reports from big banks and consumer companies, many of which beat Wall Street expectations in key metrics.
The rise in stocks Tuesday follows sharp declines last week in the major indices. The recent turmoil in U.S. equity markets – coupled with escalating trade tensions and expectations of tightening monetary policy from the Federal Reserve – has led some analysts to take on a bearish outlook of the global economy.
A record 85% of fund managers surveyed by Bank of America Merrill Lynch said they think the global economy is in a late cycle, a jump of 11 percentage points from the previous record high from December 2017. A net 38% of respondents said they expect the global economy to decelerate over the next year, the worst outlook since late 2008.
“Investors are bearish on global growth,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch.
The outlook from Bank of America Merrill Lynch follows the International Monetary Fund’s move last week to slash its outlook on global growth for this year and next year by 0.2 percentage points to 3.7%.
STOCKS: Goldman Sachs gains on investment banking, Walmart cuts guidance after Flipkart acquisition
Goldman Sachs (GS) reported earnings that topped the average of Wall Street’s expectations, buoyed by strength in its investment banking business. The bank reported earnings of $6.28 per share, versus the $5.38 expected. Revenue registered at $8.65 billion for the quarter, exceeding estimates of $8.4 billion. Net revenues for underwriting in investment banking were $1.06 billion, or 20% higher than the year-ago quarter. Shares of Goldman Sachs rose 3.07% to $221.82 each as of market close Tuesday.
Morgan Stanley (MS) shares rose after the bank beat Wall Street’s expectations in its fixed income, equities trading and investment banking businesses. Fixed-income sales and trading revenue rose by 1% to $1.2 billion, while equity sales and trading revenue climbed to $2 billion from $1.9 billion. The bank delivered net income of $1.17 per share, exceeding expectations of $1.01. Morgan Stanley’s stock rose 5.77% to $45.98 per share as of the end of trading Tuesday.
Domino’s Pizza (DPZ) shares declined after the company reported that its domestic same-store sales fell shy of average analyst expectations. Same-store sales in the U.S. grew by 6.3%, the company reported Tuesday, falling just short of average expectations of 6.4%. Earnings were $1.95 per share in the third quarter, exceeding expectations of $1.75 per share. However, revenue fell short of expectations, with the pizza chain posting revenue of $786 million in the period versus expectations of $789.6 million. The stock fell 4.8% to $259.84 per share as of market close.
Walmart (WMT) cut its full-year earnings outlook following its acquisition of Flipkart, an Indian e-commerce company. Walmart, the world’s largest retailer, lowered its fiscal 2019 forecast for adjusted earnings to $4.65 to $4.80 per share, from its previous guidance of $4.90 to $5.05 in adjusted earnings per share. The company purchased a 77% stake in Flipkart for $16 billion in May in a move to help boost its e-commerce business. Walmart delivered an upbeat outlook for domestic same-store sales, which the company says will grow 2.5% to 3% in its next fiscal year, excluding fuel. Walmart’s stock advanced 2.14% to $95.83 per share as of market close.
NEWS: Business leaders drop out of “Davos of the Middle East” amid backlash
Leaders in the business community have continued to drop out of Saudi Arabia’s Future Investment Initiative in the wake of the unresolved disappearance of journalist Jamal Khashoggi. The list lengthened Monday, with Blackstone Group CEO Steve Schwarzman, BlackRock CEO Larry Fink, Sotheby CEO Tad Smith pulling out of the conference, according to various reports. Yahoo Finance confirmed Monday that representatives from investment firm KKR had canceled, as well as Google Cloud CEO Diane Green. Among the names who have not canceled to date include U.S. Treasury Secretary Steve Mnuchin, Fox Business reporter Maria Bartiromo and International Monetary Fund Chair Christina Lagarde.
The controversy surrounding Jamal Khashoggi’s disappearance after visiting the Saudi Arabian consulate in Istanbul has extended to some companies with ties to Saudi Arabia. Shares in Japanese tech company SoftBank took a hit Monday, as CEO and founder Masayoshi Son had developed strong ties to King Salman and the Saudi government, which has contributed nearly half of the capital in SoftBank’s $93 billion Vision Fund. Some analysts have commented that some firms would pull their money from the Vision Fund, or that companies would be more hesitant to accept capital from the fund given its Saudi ties.
ECONOMY: Industrial production climbs at higher-than-expected rate, job openings balloon
U.S. industrial production rose 0.3% month-over-month in September, exceeding average expectations of a 0.2% increase, according to data compiled by Bloomberg. Advances in manufacturing and mining output helped lead to increases in production for the fourth consecutive month. Capacity utilization for the industrial sector stayed flat at 78.1%.
The National Association of Home Builders sentiment survey rose one point in October to 68, registering at the same level from the same month last year. Readings above 50 are considered positive. This exceeded average expectations of 66, according to data compiled by Bloomberg.
The number of job openings increased to a higher level than expected, hitting a series high of 7.136 million in August, the Labor Department announced Tuesday. This exceeded expectations of 6.9 million openings, according to Bloomberg data, and surpassed the upwardly revised total job openings of 7.077 million from the month prior. Hires also hit a series high of 5.8 million for August, with a hires rate of 3.9%. Total separations were little changed, registering at 5.7 million for the month.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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