Week in Review: Strong earnings, job numbers unable to allay investor concerns

U.S. economic news

Fed may take more "measured approach" with additional economic stimulus
The U.S. Federal Reserve Board's long awaited quantitative easing policy will most likely be announced following its next policy meeting on November 3. The Wall Street Journal noted this week that the Fed is likely to buy "a few hundred billion" dollars in U.S. Treasury bonds over a period of "several months" to pressure interest rates and stimulate the economy. This amount is well below the $500 billion to $2 trillion figures that have been projected by some analysts and industry experts.


Jobless claims drop to three-month low
The U.S. Department of Labor reported this week that initial unemployment claims unexpectedly fell by 21,000 to 434,000 in the week ended October 23. This was the second weekly drop in the number of new unemployment applicants in the past two weeks. Some economists believe that the latest figures could be an indication that the job market is finally stabilizing.


New home sales climb in September
The U.S. Department of Commerce said that the number of new home sales in September grew 6.6% from August to a seasonally adjusted annual level of 307,000 units. The jump in sales is potentially good news for the battered housing market, which saw sales throughout most of the summer that were the slowest on record since 1963.


Consumer confidence edges up
According to several leading economists, concerns about the job market appear to be keeping U.S. consumer sentiment largely in check. The Conference Board's Consumer Confidence Index increased only slightly to 50.2 in October from a revised 48.6 in September. September's reading was the lowest since February and down sharply from 53.2 in August. A reading of 90 indicates a healthy economy.


U.S. and global corporate news


Exxon Mobil, the largest U.S. oil company by market value, reported third-quarter earnings of $7.35 billion, up from $4.73 billion a year earlier. Strong refining margins, higher commodity prices, and a 20% jump in oil production all contributed to this 55% jump in net income, surpassing analyst projections.


Ford Motor posted record third-quarter earnings gains of 70%, with net income rising to $1.7 billion from $997 million a year ago. The automaker cited a strong product line, momentum in North America, and continued success at Ford Credit as some of the reasons for the company's dramatic turnaround. It was the sixth consecutive quarterly profit for the only U.S. carmaker who avoided a bankruptcy filing last year. Ford's previous best third-quarter earnings were $1.1 billion in 1997.


ArcelorMittal, the world's largest steelmaker, said net profit for the three months ended September 30 was $1.35 billion compared with $910 million for the same period a year earlier. Despite a 48% increase in profits, the Luxembourg-based company cautioned that the remainder of 2010 will likely be difficult, and the firm forecasted lower prices and weak demand.


Procter & Gamble reported that its fiscal first-quarter earnings declined 6.8%, to $3.08 billion from $3.31 billion a year earlier, as higher commodity costs negatively impacted margins. Still, the latest profit figures for the world's largest consumer product company exceeded some analysts' estimates.

Global economic news

U.K.'s economy expands in third quarter
Britain's economy grew at a faster pace than projected during the third quarter, according to a preliminary estimate from the Office for National Statistics. Gross domestic product increased 0.8% between July and September from the second quarter. Most economists had projected growth of only 0.4% for the quarter, following the previous quarter's 1.2% growth rate. After the better-than-expected GDP figures were released, Standard & Poor's raised Britain's credit rating to stable from negative.


Bank of Japan revises growth forecast downward, holds interest rate steady
Japan's central bank said in its October outlook report that the country's economy will grow 2.1% in the year through March 2011 and 1.8% the following year. In July the bank had forecast growth of 2.6% and 1.9%, respectively. The bank, in a statement addressing its moderated forecast, cited declining demand in overseas markets such as the United States and China, the approaching end of government stimulus measures, and the strongly performing yen, which has risen to near historic levels against the dollar. In a separate move, the Bank of Japan voted to keep its key interest rate untouched at 0% to 0.1%.


German consumer confidence unchanged
GfK AG, the Nuremberg-based market research firm, said that its consumer sentiment index will remain at 4.9 in November, its highest level since May 2008. The figure is based on a survey of nearly 2,000 people. German unemployment declined for a fifteenth-straight month in October.


Switzerland consumer index falls to lowest level in six months
Switzerland's economic recovery may be stalling, at least according to one consumer indicator. UBS AG's index of consumption dropped to 1.7 in September from 1.95 in August. The latest figure is the lowest index reading since March. The consumer indicator is based on new car sales, retail sales, overnight hotel stays within the country by Swiss residents, consumer confidence, and UBS credit card transactions.

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Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com