Bank of Japan Delivers Halloween Treat for Wall Street

By Economic Indicators FOXBusiness

FOX Business: Capitalism Lives Here

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The Dow and S&P 500 booked record highs Friday in reaction to the Bank of Japan’s decision to expand stimulus measures, a move that surprised Wall Street.

Today’s Markets

The Dow Jones Industrial Average added 194 points, or 1.1%, to 17,390. The S&P 500 gained 23.3 points, or 1.2%, to 2,017. The Nasdaq rose 64.6 points, or 1.4%, to 4,630.

The blue-chip index, which also jumped to a new intraday record of 17,395 in mid-morning trading, logged its best week in two years.

After weeks of volatility, Wall Street has calmed a bit in the second half of October. Traders were faced with the looming end of the Federal Reserve’s bond-buying stimulus program, coupled with growing concerns over global economic growth.

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The Fed on Wednesday officially declared that QE3 will come to a close this month. But the Bank of Japan sung a different tune.

On Friday, its policy makers voted 5-4 in favor of expanding quantitative easing to about 80 trillion yen annually, or $727 billion. That reflects an increase of 30 trillion yen compared to the central bank’s current stimulus program.

The Bank of Japan also announced it will triple purchases of exchange-traded funds and real-estate investment trusts.

“Clearly it’s good for equities, but it’s very, very bad for the yen,” Paul Mortimer-Lee, global head of market economics at BNP Paribas, said on 'Opening Bell with Maria Bartiromo.'

The yen moved to its weakest level against the U.S. dollar since December 2007. Japan’s currency depreciated to 112.47 yen per dollar in recent trading, up 3%.

The European Central Bank will likely follow in the BoJ's footsteps, and announce additional stimulus measures of its own in December, Mortimer-Lee added.

In corporate news, Exxon Mobil (XOM) beat Wall Street views with 3% earnings growth for the third quarter despite lower production and a decline in realized oil prices. Shares closed 2.4% higher.

Chevron (CVX) posted a 13% increase in its third-quarter profit and topped consensus estimates, sending shares up 2.4%.

Starbucks (SBUX) dropped 2.3% after providing weaker-than-expected guidance for its current quarter and fiscal 2015.

In commodities, West Texas Intermediate crude oil fell 58 cents to $80.54 a barrel. Wholesale New York Harbor gasoline slipped 2.31 cents, or 1%, to approximately $2.17 a gallon.

AAA said the national average for retail gasoline prices is expected to drop below $3 per gallon Saturday. Gas prices haven’t reached that milestone since December 2010.

On the economic front, the Labor Department reported consumer spending last month fell 0.2%, the first drop for the gauge since January, while the Street was looking for a 0.1% increase. Meanwhile, personal income rose 0.2% in September, its weakest pace since December, coming in short of expectations for a 0.3% increase.

A gauge of Midwest manufacturing activity was also released Friday, which showed factory activity in the region accelerated during the month of October, though it was expected to fall. The gauge jumped to 66.2 from 60.5 the month prior, while economists anticipated a slight drop to 60. 

A reading on consumer sentiment from Thomson Reuters and the University of Michigan showed consumers were more optimistic in October. The gauge rose to 86.9, topping expectations for a reading of 86.4. The reading was the highest since July 2007.