We know that worries regarding higher taxation across the board, and spending cuts, are going to remain a concern for the foreseeable future. What we didn't expect was a ray of sunshine from the Federal Reserve, which noted that the net wealth of U.S. households rose in the third-quarter to its highest level since late 2007.
Net financial wealth rose $1.72 trillion during the quarter, led by $300 billion in housing appreciation gains, and $520 billion in stock holding gains, to push total U.S. household wealth to $64.77 trillion. In theory, if U.S. households have more wealth, they're more apt to spend. Since consumer spending accounts for 70% of U.S. GDP, this is a very optimistic sign for a rebound in U.S. growth.
On the heels of that news, the broad-based S&P 500 (SNPINDEX:^GSPC) rose 4.66 points (0.33%), to end at 1,413.94.
Leading to the upside was online content enabler Akamai Technologies (NASDAQ:AKAM), which rose 10%, after announcing a strategic partnership with AT&T (NYSE:T) to distribute content delivery network solutions in North America and, eventually, globally. After losing a CDN contract with Netflix (NASDAQ:NFLX) earlier this year, this is a sorely needed long-term win for Akamai, although it may take some time before it has a big impact on its bottom-line profits.
Starbucks (NASDAQ:SBUX) shares also took a shot of espresso, and roared higher by 5.7%, after receiving an upgrade from research firm Robert W. Baird to "outperform" from "neutral." Baird also boosted its price target on the coffee giant to $62 from $55. This upgrade comes just a day after Starbucks announced that it plans to open up an additional 1,500 cafes in the United States. In my opinion, this is a well-deserved upgrade.
However, for every ray of sunshine, there's always a cloud lurking in the background. Copper miner Freeport-McMoRan Copper & Gold (NYSE:FCX) continued its internal cave-in, shedding another 4.2%, following four separate downgrades by Wall Street analysts. The primary concern continues to be Freeport's choice to re-enter the energy business now with a combined $9 billion in purchases of McMorRan Exploration (UNKNOWN:MMR.DL) and Plains Exploration & Production (UNKNOWN:UNKNOWN), and how much of a distraction it'll be from its copper mining business. It could be a few quarters before this is all settled out, but Freeport is beginning to look attractive from a value perspective.
Also getting the cold shoulder from investors was defense contractor SAIC (UNKNOWN:SAI.DL), which dipped 3.5% after its third-quarter earnings results failed to impress Wall Street. SAI reversed a year-ago loss by reporting a $0.33 per share profit on a 3% rise in revenue, to $2.87 billion. Unfortunately, analysts had been expecting a more robust $0.35 per share profit from SAI. In response to an expected cut in defense spending, SAI announced layoffs totaling about 700 employees, in an effort to rein in costs.
A waterfall of profits or pain?
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of Netflix, Starbucks, Freeport-McMoRan Copper & Gold, and Disney, as well as puts on Starbucks. Motley Fool newsletter services have recommended buying shares of Netflix, Starbucks, and Disney, as well as creating a bear put ladder position in Netflix, and writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.