Sunday, April 22, 2012

U.S. Stocks Post First Positive Week of April

 U.S. markets rose slightly on Friday, as strong corporate earnings overcame worries about the euro zone. On Friday, the S&P 500 edged up 1.61 points or 0.12% to 1,378.53. The Dow rose 65.16 points or 0.50% to 13,029.26. For the week, the S&P 500 rose 0.6%, after falling in the two previous weeks.

Strong Results From Microsoft and IBM Boost Shares

On Friday, Microsoft posted better-than-expected results. Sales rose 6%, while earnings was $5.11 billion, which was better than what the market expected. As a result, shares rose 4% when markets opened the next day. Meanwhile, IBM posted earnings of $2.78, better than the $2.65 that analysts expected. In addition, the company raised its full-year earnings outlook.

Market Breaths Sign of Relief on Spanish Bond Auctions

On Thursday, markets breathed a sign of relief when 10-year Spanish bonds were sold at a yield of 5.743% at an auction, lower than the critical level of 6%. However, new data indicated that the effects of the LTRO are beginning to weaken.

Stocks Surge on Goldman Sachs Earnings and IMF Forecast

On Tuesday, the Dow rose almost 200 points, after Goldman Sachs and Coca Cola reported better-than-expected results. Goldman Sachs reported EPS of $3.92, better than what the market expected. In addition, the IMF raised its world economic growth forecast for 2012.

Spain Concerns Cloud Markets

On Monday, yields on Spain's 10-year government bonds rose above the critical level of 6%. In addition, Spain's 5-year CDS reached a record high. It was revealed that Spain's deputy finance minister has asked the ECB to buy Spanish debt to push down the yield. As a result, the euro fell below the US$1.30 level.

Looking Ahead to Next Week

Investors will continue to focus on earnings results next week, when 180 S&P 500 companies will be reporting. With the yield of Spanish government bonds near unsustainable levels, earnings will have to continue to beat expectations in order for the market to head higher. Even with strong earnings, stocks could head lower once earnings season is over, as the situation in the euro zone becomes the center of investor focus during a season that is traditionally weak for stocks.

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