New York: US stocks paused this week following a stream of corporate earnings that were solid enough to maintain the year`s gains, but not quite good enough to push the rally forward.
The Dow Jones Industrial Average and S&P 500 bolted to new records on Tuesday ahead of a Federal Reserve decision to keep an aggressive monetary stimulus program going. But all three indices cooled on two of three subsequent days, resulting in a mixed performance for the week.
The Dow advanced 45.27 (0.29 percent) to 15,615.55. The broad-based S&P 500 edged 1.87 (0.11 percent) higher to 1,761.64, while the tech-rich Nasdaq Composite Index fell 21.32 (0.54 percent) to 3,922.04.
As the last big week of third quarter`s earnings played out, the pattern of solid but unspectacular earnings continued. Several large companies reported big declines in earnings, yet still exceeded expectations.
"Earnings seem to be driving the market and earnings are pretty good," said Anthony Conroy, head of global trading trader at BNY Convergex Group.
Third-quarter earnings for the S&P 500 are now projected to have grown 5.2 percent compared with last year, according to S&P Capital IQ.
Pharmaceutical giant Pfizer bested analyst forecasts for earnings even as revenues slightly underperformed and overall company profits dipped 19 percent on lower sales.
Pfizer is contending with diminished sales due to the patent expiration of drug blockbusters like cholesterol drug Lipitor and erectile dysfunction drug Viagra. But Wall Street bid Pfizer shares up 1.7 percent Tuesday on higher sales from products like nerve and muscle drug Lyrica and progress on a pipeline of other drugs.
"We continue to generate solid financial results on an operational basis, despite the impact of product losses of exclusivity" as well as "the challenging operating environment," said Pfizer chief executive Ian Read.
Exxon saw profits decline 18 percent due to a huge deterioration in its refining business. But earnings still bested analyst expectations by 2 cents at USD 1.79 per share, as the company snapped a losing streak of oil and gas production declines.
GM earnings fell 53 percent due to higher taxes and equity buybacks. Without these one-time items, GM profits exceeded forecasts of 93 cents per share by 3 cents.
"We made gains in the third quarter as we improved our North American margins and increased our global share on the strength of our Chevrolet brand," said GM chief executive Dan Akerson.
GM also closed the week on a high, reporting that October US sales rose 16 percent in October.
But Apple and Facebook both finished the week lower even as they bested earnings forecasts. Analysts worried that Apple forecasts suggested lower profit margins in the fourth quarter, while Facebook comments about a decline in interest among younger teens generated concern.
"The kids are Facebook`s seed corn, and you don`t want to lose that," said Silicon Valley analyst Rob Enderle.
Other problematic earnings came from insurer AIG, which acknowledged that a large planned divestiture of its aircraft leasing business could fall through; Western Union, which said profits would be hit by higher regulatory compliance costs; and Avon, which warned of a penalty in a longstanding foreign bribery probe that was "significantly greater" than hoped.
All three companies fell precipitously after announcing the earnings.
Stocks were lifted in the first half of the week as investors looked ahead to Wednesday`s meeting of the Fed`s Federal Open Market Committee, which, as expected decided to keep an USD 85 billion per-month bond-buying program going due to continued concern about the economic recovery.
But the markets ran out of steam after that.
"The markets need a break," said Bud Kasper, a financial advisor at Barber Financial Group.
Investors will continue to assess economic data through the lens of the Fed`s plans on tapering the stimulus program. Next week`s schedule includes October`s monthly jobs report and the first estimate of third-quarter economic growth.
The Fed will be closely looking at the jobs data to determine whether the partial government shutdown "had a long-term effect, or if it`s just going to cause blip during the month of October," said David Levy, portfolio manager at Kenjol Capital Management.
"The result will affect the Fed and their policy."