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Midday Market Update

Stocks Jump on Hopes for Budget Deal

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U.S. Market    
Stocks had surged by midday on optimism that congressional leaders will soon reach a budget deal to avert a U.S. default and reopen the government. 

Following failed efforts of House lawmakers to create a bill Tuesday, senators are in the process of putting together a bipartisan bill of their own, on which House Republicans will reportedly vote in a timely manner. Markets are hopeful that lawmakers can come to an agreement so that the U.S. remains solvent on its debt obligations. 

Meanwhile, the National Association of Home Builders reported that its housing market index fell to 55 this month from September's reading of 57. The drop shows concerns about affordability of homes nationwide as well as the political impasse in Washington. 

The Dow and the S&P 500 had each gained 1.4% at midday, and the Nasdaq was 1.2% higher. 

Stocks on the Move
 Bank of America (BAC) posted a third-quarter profit of $2.5 billion, significantly higher than $340 reported the same time last year. Earnings per share exceeded Wall Street expectations as the bank reaped the benefits of improved credit quality. Revenue rose by 5.4% to $21.53 billion. Shares were up by 2.4% at midday. 

 PepsiCo's (PEP) third-quarter net income and revenue showed little change compared with the same time last year, and each reading was near Street estimates. The firm saw some weakness in its drinks operations but strength in its snacks businesses.   Morningstar analysts believe the firm's strength in salty snacks, still beverages, and geographic diversification will more than compensate for a stagnating North American soft drink market. Shares were 1.7% higher at midday. 

 BlackRock (BLK) reported a 14% year-over-year profit for the third quarter and a 6.6% gain in revenue. Sales were nearly in line with Street expectations, while EPS was ahead of them. Shares were 2.9% higher at midday. 

 Yahoo (YHOO) shares were down by 0.1% after the online firm posted adjusted EPS and revenue that was nearly in line with Street estimates. Yahoo also decreased its sales and earnings outlooks for the 2013.  Morningstar analysts say the solid performance of Yahoo subsidiaries, Alibaba Group and Yahoo Japan (reported as earnings in equity interests), continues to drive the stock price, but the analysts are also still very cautious about Yahoo's ability to deepen its relationship with its users.

Also after Tuesday's closing bell,  Intel (INTC) reported a 0.7% drop in third-quarter earnings, though still ahead of Street forecasts. Revenue was nearly flat and in line with the company's expectations.  The firm continued to be affected by the headwinds facing global PC demand in its main PC processor segment. Shares were up by 1% at midday. 

Foreign Markets
Stocks in Asia were mixed, with the Shanghai Composite falling 1.8% and the Hang Seng losing 0.5%, but the Nikkei 225 gained 0.2%. 

European stocks were mixed, as well. The FTSE 100 was 0.4% higher, and the DAX had gained 0.5%. The Paris CAC was down by 0.3%, however. 

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.