World Week Ahead Eyes on US earnings

Tuesday 22nd April 2014

Wall Street has begun this week by extending their gains ahead of the Easter break with investors increasingly positive on the outlook for corporate earnings and the world's biggest economy.

Over four trading days last week, the Dow Jones Industrial Average gained 2.38 percent, the Standard & Poor's 500 index rose 2.71 percent, while the Nasdaq Composite index added 2.39 percent. Markets were closed on Good Friday.

As of Thursday's close, the S&P 500 was ahead so far in 2014, up 1.49 percent, though the Dow and the Nasdaq were weaker, down 0.34 percent and 1.62 percent respectively.

In afternoon trading in New York Monday, the Dow added 0.25 percent, the S&P 500 increased 0.32 percent, while the Nasdaq advanced 0.52 percent.

Companies including Apple, Facebook, Netflix, McDonald's and Microsoft are scheduled to report earnings this week. So are Ford and General Motors.

So far the beginning of the US quarterly earnings season has been considered positive overall, though there have been some exceptions too such as IBM. And last week Federal Reserve Chairman Janet Yellen also reassured investors the central bank will keep the easy money flowing.

Of the 87 companies in the S&P 500 that have reported results through Monday, 62 percent have surpassed earnings expectations, according to Thomson Reuters data.

"All the fundamentals still line up that stock prices can go higher. Interest rates are still low, the economy's getting better," John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, told Bloomberg News. "All of that is still a good environment for equities."

In the coming days the latest US economic data will show up in the form of the Richmond Fed manufacturing index, due today; the preliminary PMI manufacturing index, due Wednesday; durable goods orders, weekly jobless claims, the Kansas City manufacturing index, due Thursday; and preliminary PMI services and consumer sentiment, due Friday.

Investors will also get an update on the US housing industry with the FHFA house price index and existing homes sales both due today, and new home sales on Wednesday.

This week, a report showed the Conference Board's index of leading indicators climbed a better-than-expected 0.8 percent in March, following a 0.5 percent gain in February.

Shares of Ford fell 0.5 percent. The company will soon name Mark Fields its next chief executive officer and reveal when current CEO Alan Mulally will retire from the company he is credited with saving, Bloomberg News reported, citing two people familiar with the pending announcement. Mulally will step down before the end of the year and be succeeded by Fields, now chief operating officer. Ford may announce the moves as soon as May 1.

In Europe, the Stoxx 600 rose 1.1 percent last week. The UK's FTSE 100 and Germany's DAX both added 1 percent, while France's CAC 40 climbed 1.5 percent.

European markets were closed on Monday for the Easter holiday.

Here the latest data will come in reports on euro-zone consumer confidence today; euro-zone PMI manufacturing data, on Wednesday; and Germany's IFO report, on Thursday.

On Thursday, European Central Bank President Mario Draghi is scheduled to speak at the Dutch Central Bank conference in Amsterdam.

BusinessDesk.co.nz

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