Dow industrials bounced back from a rocky start to ride a Friday rally to a 1.4% gain for the week. This week is the fourth straight that the DJIA has seen overall returns, a mark not matched since January of this year. The S&P 500 rose by 1.1% while the NASDAQ 100 dropped by the same amount. Trading opened down this week as investor confidence was shaken following pessimistic comments made by German Chancellor Angela Merkel’s spokesperson Steffen Seibert. Seibert indicated that an agreement on a solution for the European sovereign debt crisis would likely not be reached at the EU summit planned for October 23. Markets remained volatile over the course of the week as new information was leaked on prospects for the summit. The euro recouped the losses it sustained earlier in the week on Friday as German finance minister Wolfgang Schaeuble contradicted Merkel and said that he hoped for a resolution.
A number of S&P 500 companies released third quarter earnings reports this week. The tech sector as a whole generally reported losses and missed earnings targets while a recent spate of mergers and acquisitions in the energy industry has boosted that sector. Bank of America (BAC) reported a profit of $6.2 billion while Goldman Sachs (GS) reported only their second quarterly net loss since the company went public in 1999. The market reaction to BofA’s report was mixed, however, as much of those profits were due to accounting methods and a one time sale of China Construction Bank stock.
McDonald’s (MCD) stock price rose to record heights following third-quarter earnings gains of 8.6% on the back of same-stores sales growth. By and large, big corporations returned healthy profits and are maintaining healthy balance books. Demand is still sluggish in the US market where the economy is still stagnating but many S&P 500 companies are offsetting this by increasing their exposure to overseas markets. Ultimately, while this is good for the S&P, small business owners are left at a huge disadvantage moving forward.
Bottom Line: the markets are currently in flux, waiting for any potential resolutions from this weekend’s summit. Investors are seeking clarity on recapitalization for European banks and how much Greek bondholders’ losses will affect those banks.
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Editorial Staff
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