S&p Rolls As Corporate Earnings Fan An Upward Trend
The US markets continued their upward trend this week as stocks rose for the third day, with the S&P 500 capping its best three-day rally in two months, as Yahoo! Inc. earnings topped estimates and industrial production gained more than forecast.
Wednesday, April 16, 2014 - 00:00
Federal Reserve Chair Janet Yellen also reaffirmed the central bank's commitment to keeping interest rates low which fueled the upswing. US macroeconomic data has continued to come in reasonably firm and it doesn’t appear that the valuations on the stock side suggest the market has overdone it. The market is finding some sort of natural trading level to bounce out of as we see slightly better-than-expected earnings and second-quarter outlooks from corporate management that seem to be encouraging. The market this week has bounced back from last week's pummeling, when the S&P 500 posted its largest weekly decline since mid-2012. This week, the major US stock indexes have climbed after earning results from Citigroup and Coca-Cola Co, and as biotechnology shares rebounded.
Recent trading has been volatile. On Tuesday, the Nasdaq opened higher, then turned sharply negative before rallying in the afternoon to end higher. According to Bespoke Investment Group, this kind of action has only happened 18 times since 2000, and a week following each instance, "the Nasdaq has averaged a decline of 2.84%," the firm wrote to clients. While only 9% of S&P 500 companies have reported results so far, 574 % have topped earnings expectations, below the long-term average of 62%. Only 53.2% have topped revenue expectations, below the long-term average of 61%.
In the latest global economic data, China reported that its economy grew at its slowest pace in 18 months at the start of 2014, but the increase was better than expected and showed some improvement in March. US manufacturing output rose for a second straight month in March in a sign of recovery from a harsh and prolonged winter that had put a damper on activity. The global economy should grow steadily at best over the coming year, a Reuters poll showed, but any rapid slowdown in China could upset the progress.
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