Signs Of Tentative Optimism On Wall Street
As far as the stock market was concerned, last week was not too far from disastrous, seeing the worst weekly performance by the S&P 500 index since 2012, but trading has shown signs of tentative optimism at times throughout the course of Monday.
Monday, August 4, 2014 - 00:00
Stocks have wavered in and out of the red at times on Wall Street today, but by early afternoon in New York the leading benchmarks had advanced, as investors took solace in the strength of US quarterly earnings and news that the ailing Banco Espirito Santo is set to be bailed out by Portugal to the tune of 4.9 billion euros (around $6.58 billion).
The S&P 500 index rose 0.36% or 6.8 points to 1932.0, out-performing the more narrowly-focused Dow Jones Industrial Average, which advanced just 0.09% or 15 points to 16,508.
Around three quarters of the S&P 500 companies have reported so far have, and of those, 69% have announced better-than-expected profits, while 64% have beaten estimates with revenue, according to Thomson Reuters. Warren Buffet's Berkshire Hathaway gained 2.5% after announcing an earnings beat for the second quarter, with net earnings up 41% year-over-year. Michael Kors ($KORS) was another company that comfortably out-performed estimates with its earnings for its first quarter ended June 28 2014, but saw its share price slump 6.7% after its short-term earnings guidance disappointed. CEO John Idol said in a statement that diluted earnings per share are expected to be in the range of $0.85 to $0.87 for the second quarter of fiscal 2015. This sits below the $0.89 expected by Wall Street analysts, though the company's guidance for full-year earnings is now higher than previously forecast. Dow component Walt Disney ($DIS) reports on Tuesday.
Though news that Banco Espirito Santo is being recapitalised by a special bank resolution fund backed by the Portuguese state has been embraced by investors in the stock market, it is something of a double-edged sword, suggesting less progress has been made than hoped in moving the eurozone's banking systems away from the flaws that led to the financial crisis of 2007-2008.
The euro has weakened 0.05% against the dollar and 0.25% against the pound today, with the ECB set to meet later this week to make its latest decision on monetary policy. The central bank has been concerned with the persistence of depressed inflation levels in the eurozone and recent data has shown few signs of progress in this area. Despite this, the consensus of expectation is for the ECB to make no change at this meeting.
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