Encouraging earnings push Wall Street higher

The rally has continued on Wall Street today, with upbeat earnings from some big-name tech stocks helping to cushion some disappointing economic reports.

After the market closed yesterday, we heard from Amazon and Microsoft, both of whom delivered expectation-beating sets of results.

Microsoft has risen more than 6% in today's trading, surging on the back of a 17% increase in quarterly revenue compared to a year ago. The company reported earnings of 62 cents per share (compared to 52 cents in the same quarter last year and 54 cents forecast by analysts) on revenue of $18.53 billion.

Microsoft has had its fair share of problems recently, with a disappointing start to its Surface tablet and sluggish sales of Windows 8 amid a slowdown in the PC market, but there are now promising signs in some of these previously troublesome areas. Declines in the PC market are still hurting the Windows division, and will likely continue to do so, but sales of its Surface tablets are starting to pick up, Microsoft’s enterprise products show robust growth and revenue from the much-maligned Bing is expanding at a rapid pace.

Amazon made a third-quarter loss of 9 cents per share, which was in line with estimates, on revenue of $17.09 billion, which is 24% higher than the comparable quarter in 2012 and higher than expected. Amazon’s modus operandi of spending vast amounts of cash now in the hopes of future growth does not appear to be deterring investors, and its share price has risen 8.5% today.

That has helped to bump the leading US stock indices higher today, especially the NASDAQ, in which these stocks have a greater combined weighting than the Dow or S&P 500 (Amazon isn’t a component of the Dow, while Microsoft’s weighting in the NASDAQ is several times that of its weighting in the S&P 500).

By early afternoon in New York, the Dow was up 0.17% or 26 points at 15,535, the S&P 500 was up 0.16% at 1754.9 and the NASDAQ 100 gained 0.51% to 3379.2.

Macroeconomic news has not been very encouraging though, with consumer sentiment continuing to slump in October and durable goods orders dropping 0.1% in September with the volatile transportation component stripped out (the headline rate, including transportation, rose 3.7%). This suggests that even before the shutdown, the manufacturing sector was experiencing a soft patch.

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