Technology stocks led a broader stock advance Friday, as Microsoft's upbeat earnings and Countrywide's optimistic outlook overshadowed any potential worries about a plunging dollar and surging oil and gold prices. Bets that the Federal Reserve will probably cut interest rates next week added to the day's gains. The DJIA added 134.8 points to close at 13806.7, the Nasdaq added 53.33 points to 2804.19 and the S&P500 closed 20.9 points higher at 1535.3. Microsoft's strong earnings report and forecast soothed investors worried about the first quarter of decelerating earnings growth in at least five years. Perhaps even more soothing was news that Countrywide expects to return to profitability in the fourth quarter, despite reporting a steep third quarter loss.
Microsoft reported quarterly sales and earnings that topped estimates late Thursday. The company also lifted its current quarter and fiscal earnings and revenue guidance. The upbeat earnings report was important to stock investors, amid a decidedly mixed to weaker quarterly reporting period.
Countrywide Financial reported a steep third quarter loss that was worse than what analysts were expecting. However Countrywide said that it felt the worst of the mortgage meltdown in the third quarter. Looking forward, the company said the fourth quarter should be profitable.
Merrill Lynch stock jumped on reports that its CEO Stanley O'Neal, could be forced to resign after the bank took a $7.9bn writedown in the third quarter, related to bad mortgage investments. Additionally the NYTimes reported Friday that O'Neal talk with Wachovia about a potential merger, without consulting the bank's board.
In economic news, the University of Michigan's October consumer sentiment index was revised down to 80.9 from a previous reading of 82. Economists thought it would be revised up to 82.3.
US light crude for December delivery rose $1.40 to $91.86 a barrel on NYMEX. Crude reached a record $92.22 in Asia trading overnight.
COMEX gold for December delivery rose $16.50 to settle at $787.50 an ounce.
Treasury prices slipped, raising the yield on the benchmark 10 year note to 4.39 percent from 4.38 percent.
Japanese stocks rose on Monday, driven up by Nissan Motor, which posted surprisingly strong results, and bank shares jumped as investors bet the worst is over for the sector after the credit squeeze over the summer months. Expectations that further interest rate cuts from the US Federal Reserve will help loosen up credit markets also supported bank shares and the broader market. A string of blue chip stocks such as Canon Inc and Honda Motor helped buoy the market in profitability hopes, sending Tokyo stocks to their highest levels in more than a week. But investors sold shares in firms with disappointing results, such as Advantest Corp which skidded nearly 7 percent after it posted a drop in first half net profit and cut its guidance for this year to below expectations. The Nikkei closed 192.45 points higher at 16698.08, the highest close since Oct 19.
The FTSE100 closed 85 points higher on Friday as high oil and metal prices boosted commodity shares, while M&A talk propelled Resolution, Kingfisher and Standard Chartered higher. Commodity stocks added 57 points to the index as oil prices rallied to a fresh record high and metal prices firmed. BP added 2.7 percent and its rival Royal Dutch Shell climbed 3 percent. BG Group added 2.6 percent. In the mining sector, BHP Billiton, Rio Tinto, Anglo American, Xstrata, Vedanta Resources, Antofagasta and Kazakhmys all rose.
Banks were another standout sectoral gainer, helped by comments from Countrywide Financial Corp that it expected to be profitable in 2008. The stock had earlier been beaten down by a third quarter loss following deterioration in the US housing market. Standard Chartered climbed 4.9 percent to hit a record high as traders cited market talk that the Bank of China was interested in the bank. StanChart declined to comment, and a Bank of China official said he had not heard of any potential investment in Standard Chartered. Wolseley gained 3 percent on the back of the Countrywide comments.
Resolution gained 2.4 percent after rival Pearl made a £4.9mn cash offer for the company in a move aimed at thwarting a deal between Resolution and Standard Life agreed just hours earlier. Standard Life added 0.8 percent in market expectations that the insurer might not win the battle to acquire Resolution.
Sainsbury lost 3.2 percent to top the FTSE100 losers after the Takeover Panel set a Nov 8 deadline for Qatari investment fund Delta Two to make a firm bid for the supermarket group or walk away.