Sunday, March 27, 2011

Stock Market: Waiting For The Q1 Earnings Season

Last week the stock market swung back to its rally mode. The S&P 500, the barometer of the Wall Street, gained 2,7%, the biggest weekly rally in almost two months.

Helpful was the fact that the news about the Japan nightmare and the crises in Middle East & North Africa were cooling. Helpful also were some mergers (AT&T is buying T-Mobile USA) and further positive signals from the economy (like sinking weekly jobless claims).

But it seems the most positive impulses came again from some big companies, which reported strong profit and revenue numbers for the last quarter. For example the business software giant Oracle reported more profit & revenue growth than the analysts had predicted. Good numbers came also from other technology bellwethers like Red Hut (a specialist for Linux software),  Micron Technology, the biggest U.S. producer of computer-memory chips, and the electronic manufacturer Jabil Circuit. The luxury retailer Tiffany & Co. also reported an impressive profit gain. This week’s earnings reports were “very, very positive, and a lot of the commentary coming out of the companies was also positive", commented a fund manager quoted by Bloomberg.

The numbers show that the companies didn`t lose their ability to report impressive profit numbers, which has been the motor of the rally since March 2009. The company results from this week also kindle the hope, that the Q1 earning season will be as good as the last one. In around 2 weeks, companies will begin releasing their reports on the first quarter of the year.

It seems that the rally this week was partly a bet on a strong Q1 earnings season. We would say in German that the stock market conceded some "Vorschu├člorbeeren",  which means to give advance praise.

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