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NEW YORK (CNNMoney)
The S&P 500 inched lower after closing at a record high Friday. The Dow Jones industrial average and the Nasdaq were were also down slightly.
Investors have been pleased by the latest batch of corporate earnings. About half of the companies in the S&P 500 have reported their third quarter results, and 75% of them were better than expected, according to FactSet.
Still, profit growth has been sluggish. So far, overall earnings have increased a mere 2.3%, led by companies in the consumer discretionary sector.
Shares of Merck (MRK, Fortune 500) fell after the drugmaker reported sales that missed forecasts.
Burger King (BKW) surged after the fast food chain reported earnings and revenue that topped forecasts. Apple (AAPL, Fortune 500) and Herbalife (HLF) are due to report in the afternoon.
Apple is expected to report earnings of $7.96 per share, down 8% from last year, according to a survey of analysts by Thomson Reuters. Earnings for the iPhone and iPad maker have declined for three quarters in a row.
Related: This could be Fed's largest stimulus yet
Fed on deck. Stocks have also found recent support on hopes of continued stimulus from the Federal Reserve.
The Fed has a policy meeting this week and is widely expected to say it will continue buying $85 billion in bonds and mortgage-backed securities a month.
Investors had expected the Fed to cut back, or taper, its bond buying this year. But the government shutdown may have caused economic damage and uncertainty that will keep the Fed from pulling back on stimulus just yet.
Steven Ricchiuto, chief U.S. economist at Mizuho Securities, expects the Fed to delay tapering until the middle of 2014, "at the earliest."
Related: Bond rates unlikely to soar again
John Stoltzfus, chief market strategist at Oppenheimer, said stocks have have also been powered by genuine improvement in economic "fundamentals," pointing to strong auto sales and a recovery in housing, among other things.
Stoltzfus expects stocks to move higher in the long term as the economy expands and investors shift money in out of safe havens like bonds and into more risky assets. But with many stock prices at all-time highs and the threat of additional political risk on the horizon, "don't be surprised if we experience some choppiness ahead," he added.
On the economic front Monday, the Fed said industrial production increased 0.6% in September, following a 0.4% rise in August. The National Association of Realtors said pending home sales, which measure the number of home sales in contract that have not yet closed, fell 5.6% in September.
European markets were lower in afternoon trading. Nearly all Asian markets ended with gains Monday. Japan's Nikkei surged more than 2%, recovering from a near 3% drop on Friday.
Marc Chandler, strategist for Brown Brothers Harriman, said the rally was supported by strong outlooks from Panasonic (PCRFF), Toyota (TM) and Canon (CAJ).
First Published: October 28, 2013: 9:48 AM ET
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