Market snapshot: results and data encourage bulls

Investors continue to be enticed by a mix of comforting economic data and a largely positive start to the quarterly reporting season.

The Dow Jones hit yet another record high, propelled in part by strong numbers from The Travelers Companies Inc (NYSE:TRV) which sent the shares 9% higher.

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Elsewhere, Morgan Stanley (NYSE:MS) shares jumped by almost 7%, adding to what has been an impressive set of banking results, while Netflix Inc (NASDAQ:NFLX) rose by as much as 5% in trading after the bell. The streaming giant beat on almost all metrics, while projecting sales for the current quarter which exceeded estimates. The mix of revenue growth and cost control also boosted the operating margin to 30% from a previous 22% in what has been an exceptional period for the company, with the shares having added around 50% so far this year.

Elsewhere, there was a nod towards the AI revolution not having run out of steam, with the US listed shares of Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) closing up by almost 10%, having reported record third-quarter results and raising its revenue guidance for the final quarter. The news lifted other stocks seen as having a significant exposure to AI, although gains were less powerful, with the Nasdaq eking out a marginal gain.

In economic news, the US consumer appears to be in rude health, which is a major support to the strength of the economy. Retail sales for September rose by 0.4% against an expected 0.3%, with sales excluding cars jumping by 0.5%, comfortably outstripping the estimated 0.1%. With weekly jobless claims also coming in lower than expected, the perfect scenario of a soft economic landing is becoming increasingly possible, which in turn gives the Federal Reserve more optionality in its interest rate deliberations. 

In the meantime, the main indices continue to march higher in the year to date, with the Dow Jones ahead by 14.7%, and with the more tech-exposed S&P500 and Nasdaq having added 22.5% and 22.4% respectively.

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Asian markets are currently dominated by a fascination with China, where violent share price swings have accompanied euphoria and disappointment following stimulus comments from the authorities over recent weeks.

Overnight, the mood music was positive as the People’s Bank of China suggested that large financial institutions should move to support economic growth and the financial markets, while also hinting at further interest rate cuts to stimulate what has been something of a slumbering giant.

The need for action was further underlined with the release of the latest quarterly GDP numbers, which expanded at 4.6%, down from 4.7% the previous quarter and leading to a cumulative figure of 4.8% so far this year. Quite apart from being shy of the official 5% target, the pockets of weakness as evidenced by a flagging property sector, high youth unemployment and low consumer confidence are all areas which need to be addressed.

In the UK, the reported consumer confidence crisis ahead of the Budget appears not to have reached the ears of customers just yet, as retail sales rose by 0.3% in September, as compared with estimates of a 0.3% decline. The launch of the latest iPhone and other technology products were held up as being major drivers of the growth, while in the background falling inflation and sufficient wage growth may have been enough to have underpinned the important consumer contribution to the economy. 

Even so, both of the main UK indices slipped at the open, with the housebuilders under some pressure as Budget uncertainty continues to unsettle the outlook despite new government pledges to revive the sector.

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Swimming against the tide were the likes of the mining stocks and other China exposed stocks such as Prudential (LSE:PRU) following the country’s latest stimulus pledge, while continued strength in the gold price also contributed to gains.

Next week, the UK quarterly reporting season begins in earnest, where the banks will be in particular focus. The read across from what has proved to be a robust set of earnings from US peers augurs well, while in particular the likes of Barclays (LSE:BARC) could benefit from the rise in dealmaking which has been seen Stateside in its own investment banking division.

For now, the FTSE100 remains ahead by 8% so far this year, with a return to the previous record high set in May now encouragingly in sight and around 1% away.