Wall Street Wrap for 29 October 2010

Wall Street Wrap for 29 October 2010

New York: US stocks ended on a flat note on Friday, wrapping up another strong month driven by expectations the Federal Reserve will flood the economy with cash next week.

Investors kept trading to a minimum this week in anticipation of next Wednesday’s announcement. Activity the last several weeks has been heavily influenced by hopes for a large round of asset buying.

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While earnings have largely taken a back seat to macroeconomic data, Microsoft Corp’s stock rose 1.5% to $26.67 a day after its profit beat estimates on higher sales of its flagship software.

Investors are betting on volatility to rise after Wednesday’s announcement and have been hedging against unexpected outcomes from the Fed meeting, as well as Tuesday’s midterm elections. The CBOE Volatility Index climbed about 13% this week, even as stocks rose marginally.

“There’s no getting around how big of a week next week is, and it could be an inflection point either up or down," said Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.

The midterm elections have also garnered investor attention, with polls indicating a Republican takeover of the US House of Representatives.

On the downside, Dow components Chevron Corp and Merck & Co, fell after posting quarterly results. Chevron fell 2.2% to $82.61 on a weaker-than-expected profit, while Merck lost 1.8% to $36.28 after its sales disappointed investors.

The Dow Jones industrial average added 4.54 points, or 0.04%, to 11,118.49. The Standard & Poor’s 500 Indexshed just 0.52 of a point, or 0.04%, to 1,183.26. The Nasdaq Composite Index edged up just 0.04 point, or 0.00 percent, to 2,507.41.

For the week, the Dow dipped 0.1% while the S&P 500 edged up only 0.02% and the Nasdaq added 1.1%.

A Healthy October

For the month of October, though, it was a solid upswing, with the S&P 500 gaining 3.7%, while the Dow advanced 3.1% and the Nasdaq jumped 5.9%.

US economic growth edged up as predicted in the third quarter, but not enough to chip away at high unemployment or change expectations of more monetary easing from the Federal Reserve next week.

In another snapshot of the economy, the Thomson Reuters/University of Michigan’s survey showed that consumer sentiment weakened slightly in October, dropping to its lowest level in almost a year.

The week of 1 November marks the final peak week of the third-quarter earnings season, as 94 S&P 500 companies and two Dow components are expected to report.

With 335 S&P 500 companies having reported so far, some 77% have beaten earnings estimates. That is just shy of the record beat rate of 79% in the third quarter of 2009, according to Thomson Reuters data.

Volume was light, with about 6.9 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below the year-to-date daily average of 8.73 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 17 to 11, while on the Nasdaq, seven stocks rose for nearly every six that fell.