While you were sleeping: Visa, MasterCard rally

Wall Street rose after a report showing the US economy grew at a better-than-expected clip in the third quarter, while shares of Visa and MasterCard rallied after their latest earnings topped expectations.

In afternoon trading in New York, the Dow Jones Industrial Average climbed 1.30 percent, the Standard & Poor’s 500 Index rose 0.53 percent, while the Nasdaq Composite Index gained 0.34 percent.

A rally in shares of Visa and those of Merck, last up 9.7 percent and 1.8 percent respectively, propelled the Dow higher. Shares of Intel dropped, sliding 3.3 percent for the largest percentage loss in the Dow.

Shares of Visa gained on better-than-expected earnings as well as the announcement of a US$5 billion share-buyback program.

“The underlying metrics which will drive our revenue growth over the longer term are strong and getting stronger,” Charlie Scharf, chief executive officer of Visa, said in a statement. “Our partnerships are growing, our capabilities are improving, and the opportunity for Visa to disintermediate cash across the globe is bigger than ever.”

Analysts agreed.

“The quarter looked good. The most important thing is that we saw an improvement in cross-border transactions and the share buyback shows confidence,” Gil Luria, analyst with Wedbush Securities, told Reuters.

Shares of rival MasterCard jumped 8.6 percent, also on earnings that surpassed expectations.

So far this reporting season, 75.5 percent of S&P 500 companies haveexceeded profit expectations, according to Thomson Reuters data, above the long-term average of 63 percent.

The US economy also delivered. A Commerce Department report showed gross domestic product expanded at a 3.5 percent annualised pace in the three months ended September, following a rate 4.6 percent growth in the second quarter. The rate of growth bettered economists’ expectations. It also fuelled bolstered expectations the Federal Reserve might raise interest rates sooner than previously thought.

The Fed on Wednesday said it ended its monthly bond-buying program and said it continued “to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability.”

“A strong [GDP] report, on the heels of a more hawkish tone from the Fed yesterday, has some investors thinking we could see a rate hike faster than might otherwise have been hoped,” Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, told Reuters. “That’s dampening the spirits of investors who were hoping for easier monetary conditions for an extended period.”

To be sure, some analysts pointed out weaknesses in the GDP data too.

“The report was broadly constructive, but with weakness emerging in housing and consumption spending, we expect the pace of growth to slip further in the fourth quarter,” Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.

In Europe, the Stoxx 600 finished the session with a 0.6 percent gain from the previous close. The UK’s FTSE 100 Index rose 0.2 percent, Germany’s DAX increased 0.4 percent, while France’s CAC 40 climbed 0.7 percent.

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