Strong Earnings Drive Stocks

Weekly Update – April 23, 2012

Strong corporate earnings caused stocks to rally last week for the first time this
month. The S&P closed up 0.6% for the week, while the Dow closed 1.4%
higher, and the Nasdaq trimmed 0.36%. With no domestic economic reports
released on Friday, traders turned their attention back to lingering concerns over
Europe and China, and markets lost some momentum in afternoon trading. Even so,
last week’s positive earnings reports are alleviating concerns about the
economy and making investors feel more confident about the rallies we’ve seen
this year. With 23% of S&P 500 companies having reported results so far,
more than four out of five have beaten expectations by an average of 8.8%.
Profit growth in this quarter has also been up 6.2%, according to Thomson
Reuters Proprietary Research.[i]

While some analysts are concerned that stocks are poised to repeat their 2010 and
2011 performance – when a mid-year retreat followed an April peak – there are
many differences between the economy of the past two years and today. The 2010
and 2011 pullbacks largely occurred because of recession fears and shocks
created by the Japanese Tsunami, but the U.S. economy is on more solid footing
than at any other time in the recovery. Current indicators point to slow and
steady economic growth, and we have already moved away from index highs. If we
continue to see positive earnings among the nearly 180 S&P 500 components
reporting next week, we may see markets sustain their upward trajectory.[ii]

Investors will also be closely watching Tuesday’s meeting of the Federal Reserve FOMC.
With an optimistic economic outlook and improving jobs situation, it is
unlikely that the Fed will conduct another round of bond purchases. Even so, we
will be monitoring the Fed’s statement on Wednesday, and will be certain to
fill you in on any outstanding developments. I hope you have a great week!



Looking to contribute an article to the blog? Click here to learn about how to apply and what the guidelines are.

Book Todd For Your Next Event