Strong like bull! GDP and earnings fuel spike in NDX
10/30/17

On Friday before the open, the US Department of Commerce released its third-quarter report on the US economy’s Gross Domestic Product (GDP). The numbers came in reporting a 3 percent growth rate, well better than the expected 2.5 percent growth rate.1

The increase in US third-quarter GDP was helped by a variety of inputs including strength in personal spending, private investments, exports, and government spending.2

Mike Loewengart from E*TRADE Financial sees this strength in GDP amid external headwinds as impressive considering the circumstances, stating “Many on the street are no doubt applauding today’s GDP report as a blowout win. Given these numbers are coming on the heels of catastrophic hurricanes, it appears—by early measures—that the economy fared more than OK against a hostile economic adversary.”

To help the bull markets even more, there were strong earnings reports from Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG). Clearly the tech sector was one of the strongest performing sectors last week. One thing that was shared amongst all of them was cloud computing contributing to their growth.3

  • AMZN, the world’s largest online retailer, saw its stock price climb more than 12 percent after it announced strong sales growth from “Prime Day” offerings as well as sales from its recent acquisition of Whole Foods Markets.4
  • MSFT stock surged more than 6 percent, setting all-time highs for the stock, after it announced beating estimates on both revenues and earnings.5
  • GOOG stock also surged more than 6 percent following its strong growth report on advertising revenues.6

With the boom in the tech sector, the Nasdaq 100 Index (NDX) outperformed the broader market S&P 500 Index (SPX) last week. The SPX ended the week relatively flat while the NDX jumped to all-time highs:

Nasdaq 100 (NDX) versus S&P 500 (SPX) 10/25/2017 - 10/27/2017

Source: OptionsHouse by E*TRADE

Of course it wasn’t all good news last week. Pharmaceutical company Merck (NYSE: MRK) dropped more than 4 percent after it reported a drop in revenues.7

And toy-maker Mattel (NASDAQ: MAT) plunged more than 13 percent after it reported a drop in earnings and a suspension in its current dividend.8

This week continues the string of earnings season reports. Today after the close we will hear from Mondelez International (NASDAQ: MDLZ).

Tomorrow before the market open we’ll hear from Pfizer (NYSE: PFE), MasterCard (NYSE: MA), and British Petroleum (NYSE: BP).

Wednesday we’ll start the new month hearing from some big names after the close: Facebook (NASDAQ: FB) and Tesla (NASDAQ: TSLA).

Thursday after the close it will be Apple (NASDAQ: AAPL) and Starbucks (NASDAQ: SBUX). And on Friday we will hear from the ever-popular Berkshire Hathaway (NYSE: BRK.B).

 

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1.       CNCB: First reading on third-quarter GDP up 3.0%, vs 2.5% rise expected. 10/27/2017.

2.       Bureau of Economic Analysis: Gross Domestic Product: Third Quarter 2017 (Advance Estimate). 10/27/2017.

3.       Reuters: Cloud computing drives massive growth for big U.S. tech firms. 10/26/2017.

4.       Reuters: Amazon sales surge after Whole Foods acquisition, busy Prime Day. 10/26/2017.

5.       Business Insider: Microsoft hits a record high after crushing earnings (MSFT). 10/27/2017.

6.       Reuters: Alphabet’s mobile ad revenue surges; shares jump. 10/27/2017.

7.       Reuters: Cyber attack hits Merck results, Keytruda notches new milestone. 10/27/2017.

8.       Seeking Alpha: Mattel: A Mistake To Suspend The Dividend. 10/27/2017.