By Christopher Whittall
U.S. stock futures inched higher Friday while shares in Europe
mostly fell, following the latest batch of corporate earnings and
after data showed U.S. economic growth accelerated last
quarter.
Futures markets pointed to a 0.1% opening gain for the S&P
500 after Wall Street ended lower Thursday following a sharp
selloff in government bonds. The Stoxx Europe 600 slipped 0.5%
recently after Asian shares broadly fell.
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% after three
consecutive quarters below 2%.
Earnings season, meanwhile, remains in full swing on both sides
of the Atlantic. Reports from roughly half of the S&P 500
companies suggest earnings may grow after five consecutive quarters
of declines.
But stock markets are still 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.
Bond markets broadly steadied Friday, with the yield on the
10-year U.S. Treasury edging higher to 1.875%, 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.
Larry Hatheway, group head of multiasset portfolio solutions at
GAM Holding, said the fact equity markets haven't sold off more as
bond yields have risen shows this "isn't necessarily a threat to
the market."
He said: "That reflects the same sentiment about what is driving
yields higher: growth" and signs of a pickup in inflation.
"This isn't a bad world for equities," Mr. Hatheway said, adding
that rotating into more cyclical stocks that benefit from stronger
economic growth becomes important in this environment.
In Europe, food and beverage shares led the declines after
Anheuser-Busch InBev NV, the world's largest brewer, cut its
revenue forecast, sending its shares down 4.1%.
Investors also continued to digest the latest batch of bank
earnings, with Swiss lender UBS Group AG reporting a fall in net
profit in the third quarter and French bank BNP Paribas SA
reporting a better-than-expected third-quarter net profit. The
Stoxx Europe 600 Banks subindex was down 0.8%.
In the U.S., Exxon Mobil shares fell 1.1% premarket after the
oil giant posted its eighth straight quarter of year-over-year
profit declines and its ninth consecutive quarter of falling
revenue. Shares in Amazon.com Inc. fell in 5.4% in premarket
trading after the online retail giant late Thursday posted its
lowest quarterly profit in a year.
Investors are hoping companies in the S&P 500 can avoid a
sixth consecutive quarter of falling corporate earnings from the
previous-year period, which would be the longest such stretch of
declines in FactSet records going back to 2008.
"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.
Kevin O'Nolan, a portfolio manager at Fidelity International,
said he's "mildly positive" on U.S. equities, judging that some of
the factors that had eaten into corporate profits in recent
quarters -- such as the fall in commodity prices and a stronger
U.S. dollar -- are starting to recede.
Shares in Baker Hughes Inc. were up 8.5% in premarket trading
following a Wall Street Journal report that General Electric Co. is
in talks to merge its oil-and-gas business with the Houston-based
company.
Shares in Google parent Alphabet Inc. were also up 1.4%
premarket after the company reported a 27% increase in
third-quarter profit Thursday.
Japan was the one notable bright spot in Asian markets, 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 roughly flat after
reaching its highest level since early March on Thursday.
In commodities markets, U.S.-traded crude oil prices were down
0.8% at $49.31 a barrel, while gold was down 0.4% at $1,264 an
ounce.
Write to Christopher Whittall at
christopher.whittall@wsj.com
(END) Dow Jones Newswires
October 28, 2016 09:02 ET (13:02 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.