Dow surges 320 points on McDonald's, ECB stimulus talk
Stocks surged Thursday as investors were encouraged by a supersized profit beat by fast-food giant McDonald's and signals from European bankers that more stimulus might be on the way.
The Dow Jones industrial average rose 321 points, or 1.9%, to 17,489, helped by a 8.1% gain in McDonald's (MCD). The gains were held down by an earnings miss from financial services firm American Express (AXP), whose shares were down more than 5%. Heavy-equipment maker Caterpillar (CAT) also fell shy of profit estimates, but its stock was up 2.9%.
The Dow is now trading at its highest level since Aug. 18. The blue-chip gauge's last 300-plus point gain came on Oct. 5.
The broader Standard & Poor's 500 index gained 34 points, or 1.7%, to 2053 and moved back above the key 2040 level It came within striking distance of its 2014 close of 2058.90.
The Nasdaq composite rose 80 points, or 1.7%, to 4920.
Thursday was a busy day for earnings, with Dow component Caterpillar missing earnings-per-share forecasts by 3 cents, although investors shrugged off the miss, pushing the stock up 2.9% to $70.88. That earnings miss was offset, however, by a solid earnings beat from McDonald's, another Dow stock, which topped earnings forecasts by 13 cents. The burger and fries giant also beat revenue forecasts, sparking a big rally in McDonald's shares, which soared 8.1% to $110.87, after hitting a fresh 52-week high of $110.88 earlier in the session.
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Also giving stocks a boost: The European Central Bank hinted that more stimulus might be on the way later this year to offset economic weakness caused by the fallout of slowing growth in China and emerging markets.
The S&P 500 was also helped by news that the Freedom Caucus (hard-line conservatives in Congress) would support Wisconsin Congressman Paul Ryan for Speaker; which is viewed as a constructive development in the debt ceiling debate, Bespoke Investment Group told clients in an early-morning note.
Wall Street is now hoping better-than-expected corporate earnings can drive prices higher.
During the current third-quarter earnings season, Wall Street has rewarded companies like McDonald's for topping lowered profit expectations and has punished those that fall shy of forecasts.
Asian stocks were mixed Thursday, but stocks rebounded in mainland China, where the Shanghai composite index rose 1.5%, after falling more than 3% Wednesday. Japan's Nikkei 225 fell 0.6%, as did Hong Kong's Hang Seng index.
Stocks were trending sharply higher in Europe, where the European Central Bank left interest rates unchanged today and did not rule out more market stimulus. Germany's DAX was up 2.5% and the CAC 40 in Paris was 2.3% higher. In a press conference, ECB chief Mario Draghi, the eurozone's top central banker, said the ECB would reassess the financial situation in December, which suggests that more stimulus, perhaps in the form of more government bond purchases, might be forthcoming in Europe to combat weak growth in the eurozone.
Euro tumbles as ECB considers increasing stimulus program in Dec.
In other earnings news, Southwest Airlines (LUV) topped both earnings and revenue forecasts, pushing the stock up 7% to $44.08.
Other companies to top forecasts include: athletic apparel maker UnderArmour (UA), whose quarterly revenues topped $1 billion for the first time. Still, shares tumbled 5%. Dow Chemical (Dow) topped earnings forecast by 13 cents, sending its shares up 5% to $49.92. Also topping analyst forecasts was drugmaker Eli Lilly (LLY), whose shares were down 0.04% to $76.98.
Despite earnings that came in 2 cents shy of expectations, airline United Continental (UAL) shares were up 2.8% to $56.05.