S&P poised for record close, IBM drags down Dow after debt drama ends
U.S. markets headed to a mixed finish on Thursday, with the S&P 500 on track for a record close, as federal agencies reopened following a last-minute Congress compromise to steer the government away from default.
With investors confident enough that Republicans and Democrats would come to an agreement, they sent the Dow Jones Industrial Average more than 200 points higher on Wednesday, deflating enthusiasm for a relief rally today.
Lawmakers voted last night, by wide margins in both the Senate and Congress, to extend the government's borrowing authority and put bureaucrats back into government offices after 16 days off the job. But any celebrations are temporary.
U.S. president Barack Obama didn't waste time in warning the GOP to "win an election" if the party didn't agree with his policies, ahead of what is likely to be more tense rounds of negotiations in the months ahead. The current deal allows the U.S. to pay its debts, benefits and salaries until Jan. 15 and increases the debt ceiling until Feb. 7. Both sides have a Dec. 13 target date to chalk out a longer-term agreement.
Shares gradually climbed higher through the day, with investors shifting their attention from Capitol Hill drama to corporate earnings reports.
Heading to the close, the Dow Jones Industrial Average gave up 21 points to 15,352.51, while the Nasdaq Composite Index gained 16 points to 3,855.30 and the S&P 500 added 8 points to 1,729.38.
Elsewhere in earnings, eBay (NASDAQ:EBAY) shares tanked 4.5% after it warned of softening in the U.S. when it released results after close on Wednesday. Earnings per share beat expectations in the third quarter, while revenue missed the Street.
A bright spot on the corporate calendar was Verizon (NYSE:VZ), whose shares rose 1.7% after reporting a 40% surge in third quarter profit, with adjusted earnings and revenue topping consensus estimates.
Philip Morris (NYSE:PM) reported third quarter earnings that rose 5.1%, helped by price increases, though weakened cigarette volumes continued to impact results. It lowered its full year earnings outlook, citing cautious views for certain markets. Shares gained 0.9%.
Aside from earnings season now in full swing, there is also a dump of delayed U.S. macroeconomic data that still needs to be released. Data released today showed weekly jobless claims falling by a less-than-expected 15,000 to 358,000 for the week that ended October 12. Jobless claims were expected to drop to 335,000 from a slightly revised 373,000. The Labor Department said the data reflect continued processing delays in California and layoffs related to the goverment shutdown.
Separately, the Philadelphia Federal Reserve’s manufacturing index fell to 19.8 in October from 22.3 in September, topping consensus estimates.
European markets finished mostly lower, apart from London due to stronger than expected UK retail sales. Asian markets also closed mostly lower, apart from Japan's Nikkei, which finished up 0.83%.
In commodities, gold futures surged as the last minute deal in Washington meant that the scaling back of Fed bond purchases will be further postponed, with the contract up $40.70 at $1,323 an ounce. November crude shed $1.62 to settle at $100.67 a barrel as U.S. supplies jumped.