U.S. Stocks Rise as GDP Grows 2.9%
Economists polled by The Wall Street Journal estimated that third-quarter growth would be 2.5%
By Christopher Whittall Updated Oct. 28, 2016 11:50 a.m. ET
U.S. stocks rose Friday after data showed U.S. economic growth accelerated last quarter.
A potential deal between General Electric’s oil-and-gas business and Baker Hughes, reported late Thursday by The Wall Street Journal, capped off a week full of merger discussions, also lifting major indexes.
The Dow Jones Industrial Average rose 64 points, or 0.4%, to 18233—helped by a 2% gain in GE. The S&P 500 added 0.3% and the Nasdaq Composite gained 0.2%.
Gross domestic product expanded at an inflation- and seasonally adjusted 2.9% annual rate in the third quarter, the Commerce Department said Friday, exceeding the second quarter’s pace of 1.4%. Economists polled by The Wall Street Journal had estimated that third-quarter growth accelerated to 2.5%.
The improved U.S. economic data helped offset several weaker-than-expected quarterly results from U.S. companies, ending a busy week for corporate earnings reports.
McKesson shares tumbled 23% after the health-care giant cut its profit outlook for the year. Amgen shares fell 10% as the drugmaker reported a 36% drop in sales of its cancer-care drug Neupogen, which started facing competition late last year.
Health care was the only sector to fall in the S&P 500, declining 1.9%.
In other corporate news, shares in Amazon.com fell 4% after the online retail giant late Thursday posted its lowest quarterly profit in a year.
Even with those declines, there were some bright spots for earnings reports Friday. Shares in Google parent Alphabet rose 2.1% after the company reported a 27% increase in third-quarter profit Thursday.
So far, the earnings season is shaping up to be better than downbeat expectations. Reports from roughly half of the S&P 500 companies suggest earnings may grow after five consecutive quarters of declines.
Anheuser-Busch InBev lowered its revenue forecast Friday, sending its shares and those of other food and beverage companies lower in Europe. ENLARGE
Anheuser-Busch InBev lowered its revenue forecast Friday, sending its shares and those of other food and beverage companies lower in Europe. Photo: Reuters
“Overall, the mini earnings recession is coming to an end,” said Chris Jeffery, an asset-allocation strategist at Legal & General Investment Management. “That’s largely about the energy and materials sectors coming out of their slump,” he added.
Earnings season is also in full swing on the other side of the Atlantic. Anheuser-Busch InBev, the world’s largest brewer, cut its revenue forecast, sending its shares down 4% in Europe.
The Stoxx Europe 600 slipped 0.3%.
Stock markets in Europe and the U.S. are on track to end the month slightly lower as a variety of factors—from the coming U.S. elections to revised expectations over central-bank stimulus—have weighed on sentiment.
The bond market steadied Friday, with the yield on the 10-year U.S. Treasury edging higher to 1.852% from 1.843% at Thursday’s close, according to Tradeweb. Yields rise as prices fall.
Treasury yields are hovering around their highest level since the start of June as expectations have mounted for a rate rise from the Federal Reserve in December. More broadly, bond yields have increased across the globe amid better-than-expected growth and inflation data that investors think could cause central banks to scale back on further monetary stimulus.
Higher bond yields have weighed on parts of the stock market, such as U.S. real-estate stocks, that tend to benefit from low interest rates. Meanwhile, financial shares, which tend to profit from higher yields, have gained.
Japan was the one bright spot in Asian markets Friday, with the Nikkei Stock Average rising 0.6% as a weaker yen and recent gains in global bond yields lifted financial and export firms.
In currency markets, the WSJ Dollar Index, which measures the U.S. currency against a basket of others, was down 0.1% after reaching its highest level since early March on Thursday.
In commodities markets, U.S.-traded crude oil prices were down 0.5% at $49.45 a barrel, while gold was down 0.1% at $1,268.60 an ounce.
Write to Christopher Whittall at
christopher.whittall@wsj.com and Corrie Driebusch at
corrie.driebusch@wsj.com