Weekly Wrap A strong week for U.S. equity markets following better-than-expected second quarter earnings reports. The major averages ended on a strong note, rallying Friday following the release of the highly-anticipated European banks stress tests results. Among sectors, nine of the 10 that make up the S&P 500 advanced. Investors rotated back into cyclical stocks, with the Industrials and Materials sectors leading the way. However, mid- and small-cap indices outperformed this week, with the Russell 2000 gaining 6.6% versus 3.5% for the S&P 500.
IBM (IBM) actually led off the week with disappointing earnings results, missing on the top line, but the major averages managed to reverse a sharply lower open to close with modest gains.
For the remainder of the week, however, earnings results for the most part came in positive -- Apple(AAPL) on Tuesday; eBay (EBAY), Morgan Stanley (MS) and Qualcomm (QCOM) on Wednesday;AT&T (T), Nokia (NOK) and UPS (UPS) on Thursday; and Ford Motor (F) and Verizon (VZ) on Friday. The focus remains on the revenue line, and most of these companies met or exceeded expectations.
There were other companies that disappointed, such as Amazon.com (AMZN), but the list is much shorter.
Economic issues resurfaced on Wednesday following the release of Federal Reserve Chairman Ben Bernanke's semi-annual monetary policy report. He disappointing the market by focusing on the uncertainty still in the marketplace, saying the economic outlook remains "unusually uncertain" and the Fed remains prepared to take further policy actions as needed.
While economic commentary aided the bears on Wednesday, economic data helped extend gains on Thursday. After the major averages opened sharply higher following a strong batch of earnings results, Existing Home Sales showed a smaller-than-expected decline of 5.1% in June, helping U.S. equity markets reach new highs for the session.
Friday brought the results of the long-awaited European bank stress tests. However, investors spent more time questioning the criteria than trading on the results, and when the smoke cleared the major averages moved higher as the release removed some headline risk from the marketplace.
The Committee of European Banking Supervisors found that seven of the 91 banks failed the stress test under the adverse scenario, with an expected impact on trading books over two years expected to be 54.1 bln euros.
However, many thought the criteria were not much of a stress on the banks. For instance, the "sovereign risk shock" in the adverse scenario made the assumption that there were no defaults.
There is plenty on the docket for next week. The number of companies reporting second quarter earnings will ratchet higher, but there are fewer big names, though the list includes the likes of BP(BP), Boeing (BA), Exxon Mobil (XOM), Sony (SNE) and Visa (V). Economic data/commentary will pick up later in the week with Durable Orders and the Fed Beige Book on Wednesday and the Advance reading for Q2 2010 GDP on Friday. Finally, the next round of Treasury auctions will take place in the middle of the week. 
No comments:
Post a Comment