Wall St up as Visa, Mastercard rally

Specialist Alison Gamba directs trading at her post on the floor of the New York Stock Exchange. File photo / AP

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 per cent, the Standard & Poor's 500 Index rose 0.53 per cent, while the Nasdaq Composite Index gained 0.34 per cent.

A rally in shares of Visa and those of Merck, last up 9.7 per cent and 1.8 per cent respectively, propelled the Dow higher. Shares of Intel dropped, sliding 3.3 per cent 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 programme.

"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 per cent, also on earnings that surpassed expectations.

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

The US economy also delivered. A Commerce Department report showed gross domestic product expanded at a 3.5 per cent annualised pace in the three months ended September, following a rate 4.6 per cent 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 per cent gain from the previous close. The UK's FTSE 100 Index rose 0.2 per cent, Germany's DAX increased 0.4 per cent, while France's CAC 40 climbed 0.7 per cent.