Dollars & Sense

Stocks rise on profit gains from Microsoft, others

Updated: 2013-10-25T22:39:40Z

Strong third-quarter results from technology companies drove investors into stocks on Friday, giving the market its third straight weekly gain.

After reporting results that topped expectations, Microsoft rose 6 percent and Amazon.com rose 9 percent. The Standard & Poor’s 500 index hit another record. The Nasdaq is the highest it has been in 13 years.

The gains were broad. All 10 industry groups in the S&P 500 rose, led by telecommunications with an increase of 1 percent.

Most companies that have reported third-quarter earnings are beating financial analysts’ estimates. Even so, earnings for companies in the S&P 500 index are expected to grow just 4.5 percent over the same period a year ago, according to S&P Capital IQ, a research firm. At the start of the year, earnings were expected to rise at more than twice that pace.

Some market watchers are calling for caution, saying a significant part of the profit growth has come from cutting expenses, not increasing revenue, as the global economy remains sluggish and stagnant middle-class incomes keep U.S. consumer demand down.

“The question is: What is the outlook for earnings?” said Steven Ricchiuto, chief economist at Mizuho Securities. “There is only so much you can do with cost-cutting.”

Major U.S. stock indexes have soared this year. The S&P 500 is up 23 percent, the Nasdaq composite 31 percent. In addition to higher earnings, investors have been encouraged by continued economic stimulus from the Federal Reserve. Many had expected the Fed to pull back from its stimulus before the end of year but now think the central bank will hold off until next year, possibly March.

The Fed is buying $85 billion worth of U.S. government and other bonds monthly with the aim of keeping interest rates low.

The stimulus program has helped investors brush aside a few warning signs about the market. Stocks look fully priced by some measures comparing them to earnings, for instance. And revenue growth is slowing. Revenue for S&P 500 companies is expected to grow just 2 percent for all of 2013, half the growth of the year before.

Economic news Friday suggested they may struggle to increase sales for a while yet.

The U.S. government that reported orders for long-lasting factory goods, excluding aircraft and military-related products, fell 1.1 percent.

Also, the University of Michigan said its index of U.S. consumer sentiment fell in October as concern grew that the government shutdown this month and the political fight over the nation’s borrowing limit would slow growth.

And with almost all the income gains from the tepid economic recovery going to the wealthy, the middle and lower classes aren’t able to increase their spending.

The Dow rose 61.07 points, or 0.4 percent, closing at 15,570.28. The S&P 500 rose 7.70 points, 0.4 percent, to 1,759.77. The S&P also closed at a record high Tuesday.

The Nasdaq composite rose 14.40 points, or 0.4 percent, to 3,943.36. That was its highest close since September 2000.

Three stocks rose for every two that fell on the New York Stock Exchange.

Microsoft beat analysts’ forecasts for revenue and earnings, giving hope to investors that its shift to devices and services from PC-based software will be successful. Microsoft rose $2.01, or 6 percent, to $35.73 after reporting a 17 percent increase in third quarter net income late Thursday.

Amazon.com was up $31.18, or 9 percent, to $363 as investors continue to shrug off its losses. The online retailer reported late Thursday that its revenue surged 24 percent to $13.8 billion in the third quarter, more than financial analysts had expected.

Zynga rose 19 cents, or 5 percent, to $3.73 after the Internet gaming company reported it had cut its losses in the third quarter. The maker of “Farmville” and “Mafia Wars” is trying to appeal more to users of smartphones and tablet computers under a new CEO.

In bond trading, the yield on the 10-year Treasury note, a benchmark for mortgages and many other kinds of loans, edged down to 2.51 percent from 2.52 percent. The yield has fallen sharply since Sept. 5, when it hit 3 percent, and is the lowest it’s been in three months.

In stocks of regional interest:

Capitol Federal Financial rose 6 cents, or 0.46%, to close at $13.16.

Cerner Corp. fell $1.63, or 2.82%, to close at $56.13.

Commerce Bancshares Inc. fell 0 cents, or 0.00%, to close at $46.55.

Compass Minerals rose $1.25, or 1.65%, to close at $77.13.

DST Systems Inc. rose $2.83, or 3.48%, to close at $84.14.

Ferrellgas Partners L.P. rose 10 cents, or 0.44%, to close at $22.70.

Garmin Ltd. rose 7 cents, or 0.14%, to close at $48.90.

Great Plains Energy rose 28 cents, or 1.20%, to close at $23.69.

H&R Block Inc. fell 22 cents, or 0.77%, to close at $28.48.

Kansas City Life Insurance Co. rose 42 cents, or 0.90%, to close at $47.24.

Kansas City Southern fell 97 cents, or 0.78%, to close at $123.49.

O'Reilly Automotive Inc. rose 78 cents, or 0.62%, to close at $125.86.

Sprint Corp. fell 7 cents, or 1.07%, to close at $6.45.

UMB Financial Corp. fell 18 cents, or 0.30%, to close at $59.88.

Waddell & Reed Financial Corp. rose 79 cents, or 1.33%, to close at $60.18.

YRC Worldwide Inc. fell 25 cents, or 2.17%, to close at $11.25.

Deal Saver Subscribe today!

Comments

The Kansas City Star is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Kansas City Star uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here