US stock surge as investors buy the dip

Published Oct 25, 2014

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New York - US equities enjoyed their best week in months as buying fever returned to the market following a month-long swoon on solid earnings and easing anxiety about the Ebola virus outbreak.

The S&P 500 jumped 77.82 points (4.12 percent) to 1,964.58 on Friday, the biggest weekly increase in percentage terms since late 2012.

The Dow Jones Industrial Average rose 425.0 (2.59 percent) to 16,805.41, while the tech-rich Nasdaq Composite Index leaped 225.28 (5.29 percent) to 4,483.72.

The gains snapped a four-week skid that had dropped some leading indices by about 10 percent, a decline considered a market correction.

The week's trade showed the market's penchant for buying the dip has been restored, at least for the time being.

“Some say, 'That's the biggest correction I've seen in 2014, I'm buying now,'“ said Art Hogan, chief market strategist at Wunderlich Securities.

“The money waiting on the sideline sees it as an opportunity.”

Market sentiment had at times veered near panic earlier in the month on worries about slowing economic growth in Europe and China and, more recently, Ebola.

But analysts pointed to a few key data points, including a euorozone purchasing managers index of business activity, which edged up to 52.2 in October from a 10-month low of 52.0 in September.

“Even though the numbers still weren't very good, they allowed European economists to dismiss the risk of a recession, at least for this quarter,” said Chris Low, chief economist at FTN Financial.

Low said Chinese growth figures, while also lacklustre, came in better than expected, while worries that US retail sales could “collapse under the weight of some kind of Ebola panic also subsided this week.”

Corporate earnings reports were generally “good enough,” he added.

Among the better performers in terms of earnings, Apple finished the week at an all-time high after fiscal fourth-quarter earnings jumped 13 percent to $8.5 billion on soaring sales of its newest iPhone models.

Dow member Microsoft's earnings bested expectations following strong sales from its Xbox consoles and Internet “cloud” services for enterprises, fortifying confidence in recently installed chief executive Satya Nadella.

Airlines also prospered, as giant carriers American Airlines and United Airlines, among others, benefited from strong consumer demand and lower fuel prices. Industry officials also expressed confidence at the sector's ability to manage the Ebola risk.

But not all the week's reports were standouts.

Perhaps the biggest major laggard was IBM, which reported its 10th consecutive quarter of lower revenues as “Big Blue” continues to struggle with its effort to shift away from low-return commodity products and toward growing sectors such as data analysis and cloud computing.

Shares tumbled 11 percent since IBM's earnings report was released on Monday.

Amazon was another underperformer, as shares sank 8.3 percent after the online retailer's third-quarter loss rose tenfold to $437 million due to the costs of product launches including new phones, tablets and television programs.

Earnings season continues next week with reports from Pfizer, DuPont, ExxonMobil and Facebook, among others.

The highlight on the calendar is the Federal Reserve's two-day monetary policy meeting that opens Tuesday. The Federal Open Market Committee is widely expected to announce the end of the central bank's asset-purchase program and keep the federal funds interest rate near zero, where it has been since late 2008.

The week's economic data include the first estimate of third-quarter economic growth and the Conference Board's consumer confidence index for October. - Sapa-AFP

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