corporate profits

Strong Earnings Results Buoy Stocks!

Posted on by George Mahfouz

Q1 strong earnings results buoy stocks! Corporate profits for this past quarter have exceeded expectations. On average corporate earnings growth surpassed 20 percent for the quarter however, it appears that the markets have priced in this impressive growth. For the most part stocks have had a muted response to their earnings results so far this year. The S&P 500 (chart) is barely up on the year. The Dow Jones Industrial Average (chart) finds itself essentially flat with the Nasdaq Composite modestly up (chart), however, the small-cap Russell 2000 (chart) quietly hit an all time high today. Interestingly enough when small-cap stocks are outperforming the other bellwether indexes, it’s usually a good sign for a rest of the market. We will have to see if history repeats itself here.

Yes the markets as a whole may not be up that much this year, but I am impressed with how the overall landscape has held up. The pending trade war with China, the on again and off again tensions with North Korea and rising interest rates have yet to really take hold of these markets in a negative manner. Yes we did experience a 10% sell-off in February but only to be met with support and a resumption of the upward bias towards stocks. That said, I do feel the markets are teetering on the potential of another pullback. Let’s take a look at the technical shape of the aforementioned indexes.

The Dow Jones Industrial Average (chart) closed just under its 100-day moving average at 24714, S&P 500 (chart) is on the other side of that coin closing just above its 100-day moving average at 2720, the Nasdaq Composite (chart) closed at 7382 and as previously mentioned, the small-cap Russell 2000 (chart) notched an all time high today breaking out of a triple top closing at 1625. So technically speaking these key indexes are not in any type of extreme condition either overbought or oversold and we will have to see how the balance of earnings reporting season plays out and whether or not we break out to the upside or have another retracement. Good luck to all 🙂

~George

Weak earnings spook stocks…

Posted on by George Mahfouz

Although Halloween is not quite here yet, the markets got spooked on Friday with weaker than expected corporate profits being reported. High profile companies such International Business Machines (NYSE: IBM), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT) and McDonald’s (NYSE: MCD) all disappointed investors, just to name a few.  On Friday the Dow Jones Industrial Average (chart) closed down 205.43 points, the Nasdaq (chart) -67.25, the S&P 500 (chart) -24.15 and the Russell 2000 (chart) lost 16.12 points.

The street should not be too surprised with the softer earnings numbers that are coming in, for most analysts have been lowering their estimates for some time now. This upcoming week over 700 companies will report their Q3 results with all eyes on Apple Computer (NasdaqGS: AAPL). Apple is schedule to issue their earnings results on Thursday. Let’s see how this week plays out before we draw any definitive conclusions as to where these markets may be headed. Have a great week and good luck to all.

~George