It was a week dominated by earnings reports. By Friday’s close, stocks had reached a one-month high as earnings reports from the industrials sector in particular reinvigorated hopes that recovery is well underway and here to stay. The Dow gained 102.32 on Friday, up 0.99% for the day and 3.24% for the week, closing at 10424.62. Verizon, General Electric, and American Express led the charge on Friday, though Boeing was the week’s star, up 10 percent between Monday morning and Friday afternoon. Verizon beat earnings expectations, though revenue fell as the company continues to battle an energized AT&T; GE’s board approved a 20 percent dividend increase, and a number of brokerages have raised ratings on American Express. Johnson & Johnson proved a laggard, down more than 3 percent for the week. The NASDAQ added 23.58 during Friday’s session, up 1.05% for the session and 4.15% for the week, finishing at 2269.47. The S&P 500 rose 8.99 on Friday, adding 0.82% for the session and 3.55% for the week, eventually settling late Friday at 1102.66.
YTD Stock Market Performance
Positive sentiment was generated (at least in part) by the fact that the vast majority of EU banks passed crucial stress tests, despite reservations among some analysts about the stringency of the tests themselves. Only seven banks failed, and they were generally small and regional, concentrated in Germany, Spain and Greece. Rising investor confidence could be seen in the fact that the CBOE volatility index—a crucial measure of investor fear—lost more than 10 percent, finishing on Friday below 24.
European banks such as Barclay’s, UBS, BNP Paribas, and Deutsche Bank had a mixed Friday on US markets. Royal Bank of Scotland and Bank of Ireland, however, responded positively to the stress test results, rising 4 percent on the news.
In Europe, the DAX rose 175.96 (2.94%) to finish at 6,166.34, while the FTSE 100, less convinced by the bank stress tests, fell 1.19 (0.02%) to close at 5,312.62. In Asia, the Nikkei remained flat, though the Hang Seng added 225.63 (1.10%) to finish at 20,815.33.
The euro closed marginally higher on Friday against the US dollar.
Gold finished the week flat at $1,187.80 per ounce, while oil dropped 3 percent, closing at $78.98 per barrel.
Overall, in a week marked by significant earnings reports, sentiment appeared to swing upward. Most companies beat expectations, though not by as much as many analysts and investors had hoped. In the coming week, 157 other major companies will report earnings, including DuPont, BP, ExxonMobil, Chevron, Boeing, Visa and Merck—among others. Will the current positive outlook hold after next Friday’s close? The vast majority of investors certainly hope so.
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The ARTS Team
About: Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com
Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac.
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