The stock market calmed today after rallying yesterday on news that the United States government avoided default and Goldman Sachs
(NYSE:GS) reported a steep drop in revenue.
Thanks to an eleventh-hour deal yesterday, the government is no longer shut down and federal employees can return to work. The Senate's compromise, which keeps the government funded through Jan. 15, passed the House of Representatives late last night 285-144. All of the votes against the bill came from Republicans, but 87 GOP representatives voted with the majority.
Stocks closed near multi-year highs yesterday, but pessimists are quick to point out that the short-term nature of the compromise merely forestalls the next raucous fiscal fight. Dagong, a Chinese credit ratings agency, still downgraded US debt after the impasse.
"The partial US federal government shutdown apparently highlights the deterioration of the government’s solvency, pushing the sovereign debts into a crisis status," Dagong wrote
. "As the issue of paying sovereign debts falls into a tool that the parties make use of to realize their own interests, the political environment is unfavorable for eliminating the risk of its sovereign debt default in the long term. The recurrence of the bi-partisan conflict over debt ceiling once again reveals the US superstructure’s incapacity to solve national debt crisis."
There is still a backlog of economic data that was put off due to the government shutdown, including the big non-farm payrolls report. Today, the government reported that initial claims for unemployment insurance fell last week, but still came in higher than expected. A total of 358,000 Americans applied for jobless benefits last week, down from 373,000 in the previous week.
US stock index futures slipped this morning after yesterday's bump. Dow
(INDEXDJX:.DJI) futures were down 0.35% at 15,195. Futures on the S&P 500
(INDEXSP:.INX) fell 0.07% to 1,712.00 and Nasdaq
(INDEXNASDAQ:.IXIC) futures climbed 0.02% to 3,264.75. Spot gold prices spiked 2.75% to $1,317.50.
In earnings news, Goldman Sachs beat analyst expectations. The investment bank's earnings rose to $1.52 billion, or $2.88 per share from $2.85 a year ago. This beat the average earnings estimate of $2.47. The increase in earnings was mostly due to lower expenses, as revenue fell 20% to $6.72 billion, which also fell short of estimates. Goldman also announced that it is raising its quarterly dividend by a nickel to $0.55.
(NYSE:VZ) shares jumped 2.3% this morning after the telco reported better-than-expected earnings. Profit rose 40% year-over-year to $2.33 billion, or $0.77 per share in the third quarter, beating estimates of $0.74. Over the quarter, Verizon announced that it will buy the remaining 45% of Verizon Wireless for $130 billions.
(NASDAQ:GOOG) will report earnings after the closing bell today. Analysts expect a 14% year-over-year rise in profit to $3.5 billion, or $10.35 per share. However, investors will be just as interested in the search giant's non-advertising revenue streams such as device and app sales as the cost-per-click on desktop ads declines.
No positions in stocks mentioned.
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