Fed boosts markets; GE's big test; Tesla slumps

Posted January 31, 2019 6:01 a.m. EST

— 1. Fed boosts markets: Global markets were higher Thursday, following a surge on Wall Street late Wednesday. The optimism was fueled by the Federal Reserve's decision to keep interest rates on hold because of risks to global growth.

Fed policy makers agreed the strategy unanimously at their first meeting of 2019.

The Dow Jones industrial average climbed 1.8% on Wednesday, closing above 25,000 for the first time since December 7. The S&P 500 was up 1.6%, and the Nasdaq was up 2.2%.

Sentiment got another lift after markets closed when Facebook revealed a record $6.9 billion profit for the final three months of 2018, despite its seemingly endless PR crises. That was a jump of 61% from the same period a year earlier and well ahead of Wall Street estimates. Its shares were up more than 10% in extended trading.

The positive trend was set to continue Thursday. US stock futures were pointing higher early in the day. Stocks in Europe and Asia also posted gains.

Following the Fed move, the next cue for markets could be the outcome of trade talks later Thursday between China and the United States

"The other hurdle [for global markets] is of course the US-China trade negotiation, which is much more challenging," said Tai Hui, chief market strategist, Asia Pacific, at JP Morgan Asset Management.

2. GE's great expectations: General Electric is set to report earnings before the opening bell on Thursday.

After a horrendous two years, GE shares are up a stunning 21% so far in 2019. The rally reflects hopes that under new CEO Larry Culp, GE has finally turned a corner.

But the hype will be difficult to live up to.

Analysts are optimistic about GE's booming aviation business, but the slumping power division is still bleeding cash. The remnants of GE Capital are another source of worry. And that's not to mention the lingering investigations into GE's accounting by the SEC and the Justice Department.

3. Tesla slumps: Tesla shares were set to open as much as 5% lower after the company reported profit that fell short of expectations after the markets closed Wednesday.

Tesla also revealed that its chief financial officer was leaving — the latest senior executive to exit the electric car company. The company was shaken last year by a series of departures by top managers, including a chief accounting officer who left after less than a month.

Earlier this month, Tesla announced layoffs impacting about 7% of its full-time workforce. Musk said the layoffs were necessary to allow Tesla to sell variants of the Model 3 at lower prices.

4. Europe's mixed bag: A bunch of major European companies reported earnings on Thursday.

Unilever disappointed analysts with 2018 sales growth of 3.1%. New CEO Alan Jope warned the company anticipates "market conditions to remain challenging" in 2019. Unilever shares fell 2.4%.

H&M said 2018 had been "a challenging year for H&M group and the industry." Its shares dropped 1.5%.

And shares in Swatch slumped as much as 6% in Switzerland after the watch making group said business had slowed in the last three months of the year.

Royal Dutch Shell delivered a more positive story. The company reported stronger than expected results, after getting a boost from higher oil and gas prices. Annual profits jumped 80% last year to $23.4 billion from $13 billion in 2017. Investors pushed Shell stock up 5%.

Diageo, the maker of Johnnie Walker, Ketel One and Guinness, also reported strong earnings. It said sales in Asia were particularly strong. Its stock climbed 4.6%.

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5. Earnings and economics: 1-800-FLOWERS, Baker Hughes, Blackstone, DowDuPont, Ferrari, General Electric, Hershey Foods, MasterCard, Nokia, Raytheon, Sherwin-Williams, Sprint and UPS plan to release earnings before the open Thursday. Meanwhile, Amazon, Haynes International and Yum China plan to release earnings after the close.

The Census Bureau plans to release its New Home Sales report for November at 10 a.m. ET.

6. Coming this week:Thursday — Amazon, GE and UPS report earningsFriday — Jobs report, ISM manufacturing index, Consumer sentiment report; Exxon and Chevron report earnings