EmailIt must be expectations of further Fed easing that are boosting the stock market, because the earnings reports are decidedly mixed and the economic news is bearish.
Plenty of companies are beating earnings estimates, primarily because forecasts were dramatically reduced ahead of the reports. That is standard operating procedure on Wall Street. The revenue numbers are generally disappointing, however, as are guidance numbers for the rest of the year. This is true of most major companies reporting this morning, and most of their stock prices are lower.
American Express, Danaher, Verizon, Johnson Controls, Travelers, Morgan Stanley, and Yum Brands stock prices are all indicated lower after earnings reports that failed to inspire. That is a good mix of companies with poor reports.
There are notable exceptions. IBM, perhaps the greatest under-told success story of the past decade, reported earnings well above expectations and even though revenue was down 3% from last year and below expectations, the stock is trading up $4 to $193 pre-market. UnitedHealth and eBay stock prices are also up on earnings reports.
New claims for unemployment rose to 386,000 for the week ended July 14 from a revised 352,000 the prior week. This is an extremely disappointing number because it is for the week in which the July employment survey was conducted. The uptick suggests another very modest (or worse) nonfarm payroll gain for the month.
Europe is temporarily off the radar screen, but the news there is not good. Spanish bond yields rose above 7%. A month ago that would have been seen as a sign of the apocalypse. Today, it garners a yawn.
S&P futures indicate an up open of about 6 points despite any bullish impetus. The market often rallies through earnings season and that may be a factor. But, underlying the mini-rally is the belief that the Fed will soon implement another round of quantitative easing. The bad new claims number is even seen by some as bullish for stocks, because it increases the chances of Fed action. The trend is difficult to dispute, but the focus could shift to the generally negative news on the economy, Europe, US fiscal issues, and the mixed (at best) news on earnings as earnings season winds down in the weeks ahead.
Founder and Chairman, Briefing.com
