While you were sleeping IBM, eBay earnings

Friday 20th July 2012

Better-than-expected corporate earnings helped lift equities on both sides of the Atlantic, though a slew of disappointing data on the US economy kept a lid on gains.

Results from IBM and eBay exceeded expectations, bolstering Wall Street. In late afternoon trading in New York, the Dow Jones Industrial Average gained 0.19 percent, the S&P 500 rose 0.12 percent, while the Nasdaq Composite Index advanced 0.74 percent.

Earnings have surpassed analyst estimates at about 70 percent of the 102 Standard & Poor's 500 Index companies that have reported quarterly results so far, according to data compiled by Bloomberg.

In Europe, the Stoxx 600 Index closed with a 1.1 percent gain for the session. Benchmark stock indexes in Paris, Frankfurt and London advanced. The latest corporate earnings including from Nokia Oyj and Akzo Nobel helped boost the appeal of equities.

"Europe has been quiet and earnings news, while not earth-shattering, is slightly better than expected," Fred Dickson, chief market strategist at DA Davidson & Co in Lake Oswego, Oregon, told Reuters. "A trading range environment is how we see it."

Shares of IBM rose a day after it lifted its full-year profit forecast. While Qualcomm lowered its revenue and earnings forecast for the current quarter, investors opted to focus on the company's forecast that sales would improve.

Not all results offered a good surprise. Morgan Stanley posted a 50 percent slide in earnings and said it will slash more jobs. Shares fell nearly 5 percent.

The latest US data, meanwhile, provided clear signs that the world's largest economy is flagging. Separate reports released today showed that sales of existing US homes unexpectedly fell and manufacturing in the Philadelphia region contracted for a third month.

Other reports revealed an increase in claims for unemployment benefits, a drop in consumer confidence, and a decline in an index of leading economic indicators.

"The data confirm that the economy has cooled off pretty considerably late in the second quarter and early in the third quarter from the pace we saw earlier in the year," Omair Sharif, an economist at RBS in Stamford, Connecticut, told Reuters.

While the appeal of the safest fixed-income securities remains strong -- German two-year yields were below zero for a 10th day as lawmakers backed a euro-area bailout of Spanish banks -- Spain struggled in today's debt auctions of two-year, five-year and seven-year notes.

The Madrid-based Treasury sold notes due in 2014 at an average yield of 5.204 percent, compared with 4.335 percent when they were last auctioned on June 7, according to Bloomberg. It also sold five-year notes at 6.459 percent, versus 6.072 percent on June 21, and seven-year securities at an average yield of 6.701 percent.

BusinessDesk.co.nz

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