- Markets closed moderately lower on Tuesday, despite good gains by energy stocks.
- Pepsico closed higher after reporting an earnings beat.
- Bank of Japan keeps policy steady, no expansion in stimulus.
The US markets took a break from their winning streak as markets closed moderately below Monday's levels, despite energy stocks posting good gains. S&P 500 (INDEX:SPAL), halting its five day winning streak, closed 7 points or 0.36% lower at 1979.92 while the Dow Jones Industrial Average (INDEX:INDU) eked out a minor gain of 0.08% to close at 16,790.19.
Biotech continued to weigh down upon Nasdaq Composite (INDEX:COMPX) , which was down 0.69%, closing for the day at 4748.36. iShares NASDAQ Biotech Index (NASDAQ:IBB) declined for the second consecutive day, closing at 301.91, down 3.6%. Nasdaq is still in the green for the year.
Meanwhile, the crude oil prices rose on the rumors that Russia and OPEC would take steps to support oil prices and forecasts showing tighter US oil supply next year due to cuts in big spending and closure of several rigs. Many oil rigs are expected to close down as oil prices continue to remain below their cost of production. The WTI rose 4.68% to $48.53 a barrel, while Brent crude posted a gain of 5.14%,rising to $51.92/barrel.
Pepsico Posts An Earnings Beat
Pepsico (NYSE:PEP) provided the markets with a reason to cheer by reporting an earnings beat. While both revenue and earnings declined from an year ago period, the results were better than expected. Pepsi reported an earnings of $1.35 against analyst consensus of $1.26 and revenues of $16.33 billion, beating estimates by $180 million. The company was helped by pick up in sales of its snacks and beverages in North America.
The beat came despite strong currency headwinds and huge write off of the company's Venezuelan operations. Strong dollar made its international sales look weaker and knocked off 12% from Pepsi's reported revenues. Pepsi also had to take a hit of $1.4 billion or $0.92 per share, on its Venezuelan operations.
Pepsi also improved its 2015 earnings outlook by raising the adjusted earnings growth from 8% to 9% for 2015. Pepsi plans return more than $9 billion to shareholders through its capital return program, including dividends and share buy backs. Pepsi stock price gained 1.32% on the day, closing at $97.07. Pepsi stock price has outperformed that of its closest rival, Coca Cola (NYSE:KO), by around 10% in the last one year.
Bank Of Japan Keeps Monetary Policy Steady
Earlier today, Bank of Japan decided to keep its monetary policy steady, maintaining its pledge to increase base money by 80 trillion Yen or $666 billion annually. While this was widely expected, the recent decision by Fed not to increase rates had increased the expectation for a expansion in stimulus. Yen registered its second consecutive gain after the bank refused to expand stimulus.
Japan's economy has been under pressure lately, with exports collapsing and inflation target of 2% being threatened by declining commodity prices. Japan's economy had contracted in April-June quarter, and many analysts expect it to shrink further in the September ending quarter. With fears of a recession looming large, many expect BoJ to expand stimulus during its October 30th meeting.
What Happens In The Markets This Morning?
Markets are likely to remain in wait mode as closely watched minutes of Feds meeting are to come out on Thursday. The minutes will give markets further insights into the possibility of a rate hike, though the latest job report has definitely hurt the chances of a rate hike this year. Also, Alcoa (NYSE:AA) will be reporting its third quarter earnings on Thursday, which comes closely on the heels of its decision to split into two.
For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.