Stocks traded mostly sideways Friday, with major benchmarks closing mixed and declining stocks outnumbering advancing ones. Investors were initially concerned about slowing economic growth in China, but sentiment reversed when Chinese government officials made statements to dispel those worries. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both managed small gains for the week.
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Consumer stocks had one of their best days in recent weeks, thanks to positive earnings reports; the Consumer Staples Select Sector SPDR ETF (NYSEMKT: XLP) closed up 2.3%. Homebuilder stocks, which have been getting pounded for a month, fell sharply, and the iShares US Home Construction ETF (NYSEMKT: ITB) declined 2.6%.
Among the individual stocks making significant moves, PayPal Holdings (NASDAQ:PYPL) soared after it reported strong user and profit growth, and American Express (NYSE:AXP) also pleased investors with a great quarterly report.
Growth surges at PayPal
Shares of PayPal rose 9.4% on better-than-expected results and news that the company's making progress monetizing its Venmo service. Revenue grew 13.7% to $3.68 billion, and adjusted earnings per share increased 26% to $0.58, compared with expectations of $0.54.
PayPal added a net 9.1 million accounts in the quarter, bringing its total to 254 million, an increase of 15% from where it stood at this time last year. The company processed 2.5 billion payment transactions in the quarter, an increase of 27%, and total payment volume (TPV) grew 25% on a currency-neutral basis to $143 billion. PayPal's users are also using the service more often, with transactions per active account growing by 9.5%.
Analysts on the conference call were particularly interested to hear CEO Daniel Schulman say that monetization of Venmo is "reaching a tipping point" -- 24% of Venmo users have made a transaction that PayPal can monetize, up from 17% last quarter and 13% in May of this year. Venmo's TPV grew 78% to $17 billion.
PayPal also announced new partnerships with American Express and Walmart (NYSE: WMT) today. The AmEx partnership will allow deeper integration with the that company's platform, as well as giving customers the ability to use its rewards points at PayPal merchants. Walmart will allow cash-in and cash-out from PayPal balances in its retail stores.
American Express benefits from strong consumer spending
When American Express delivered its third-quarter numbers after the close Thursday, it reported strong earnings growth due to increased consumer spending, higher fee income, and growth in its loan portfolio. Revenue increased 9.2% to $10.14 billion, and earnings per share soared 24.5% to $1.88, far above the $1.77 Wall Street was expecting. In response, investors sent its shares up 3.8% Friday.
Cardmember spending was up 8% -- 10% after adjusting for foreign currency movements -- and the company acquired 3 million new cards. Its Global Consumer Services Group grew net income by 15% to $779 million, Global Commercial Services had 20% net income growth to $606 million, and net income was up 38% to $580 million at Global Merchant and Network Services.
American Express also raised its guidance for the full year. It now expects 2018 revenue to grow by between 9% and 10%, and for adjusted EPS to be in the $7.30 to $7.40 range, up from prior guidance of $6.90 to $7.30, and above the analysts' consensus estimate of $7.28. "This marks our sixth consecutive quarter of strong adjusted revenue growth and our investments in new benefits, services and digital capabilities continued to generate momentum as we enter the latter part of 2018," said CEO Stephen J. Squeri in the press release.
The sterling report follows a strong second quarter, with gains coming across the company's operating units. Much of its profit growth is a direct result of lower corporate tax rates, but American Express is also generating plenty of broad-based organic growth as well.