An encouraging start to the second quarter earnings season
propelled indices higher on Tuesday. Better-than-expected reports
on the home front coupled with positive earnings reports have
lifted investor sentiment recently. Benchmarks finished in the
green for the fourth consecutive day. Investors overlooked the
International Monetary Fund's discouraging comments on world
economic growth. The IMF reduced its global growth estimate for
this year yesterday. Nine out of the ten S&P 500 industry
groups finished in the green. Shares of the materials and
industrial sectors gained the most.
For a look at the issues currently facing the markets, make
sure to read today's
Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained 0.5% to close
the day at 15,300.34. The S&P 500 added 0.7% to finish
yesterday's trading session at 1,652.32. The tech-laden Nasdaq
Composite Index rose 0.6% to end at 3,504.26. The fear-gauge CBOE
Volatility Index (VIX) declined 2.9% to settle at 14.35.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 5.8 billion shares, lower
than 2013's average of 6.4 billion shares. Advancing stocks
outnumbered the decliners. For the 72% that advanced, only 25%
Following yesterday's gains, the S&P 500 is marginally shy
of its all-time high, achieved on May 21. Investors have become
more positive following encouraging reports from the private
sector and positive government data on the job markets. A
positive start to the earnings season acted as a catalyst as
expectations from the second quarter earnings season are low.
Going forward, second quarter corporate earnings is expected to
decide the trajectory of markets.
Aluminum giant Alcoa Inc (NYSE:
), reported second quarter results after the close of markets on
Monday. The company posted earnings and revenue that surpassed
the Street's estimates. Despite healthy quarterly results, shares
declined nearly 0.1% yesterday. The company's earnings were
boosted by robust demand for aluminum from autos and airplanes.
Alcoa said global demand for aluminum will increase by 7% in
2013. According to Thomson Reuters data, earnings of the S&P
500 companies are expected to increase by 2.9% in the second
quarter from the same period a year ago. This is considerably
below the April forecast of 6.1%. Banking giants JPMorgan Chase
& Co. (NYSE:
) and Wells Fargo & Co (NYSE:
) are due to report quarterly results on Friday.
Meanwhile, the International Monetary Fund reduced global
growth forecast for the fifth consecutive time for the year 2013.
The IMF trimmed its global growth forecast for this year to 3.1%
from the previous projection of 3.3%. The IMF said: "the
possibility of a longer growth slowdown in emerging market
economies, especially given risks of lower potential growth,
slowing credit, and possibly tighter financial conditions if the
anticipated unwinding of monetary policy stimulus in the U.S.
leads to sustained capital flow reversals." In light of rising
government spending cuts, IMF reduced its U.S growth estimate for
the year 2013 to 1.7%, lower than 2.0% predicted by the U.S.
government's Office of Management and Budget. The fund also said
central banks of rich countries should continue with stimulus
measures until full economic recovery is attained. IMF further
added that a rise in long-term interest rates have hampered the
growth of emerging countries.
Rating agency Standard & Poor's decreased Italy's
sovereign credit rating to BBB from BBB+. The agency said: "The
rating action reflects our view of the effects of further
weakening growth on Italy's economic structure and resilience,
and its impaired monetary transmission mechanism."
Shares of material sector gained the most after Alcoa reported
better-than-expected quarterly results. The Materials Select
Sector SPDR (XLB) gained 1.6%. Stocks such as Air Products &
Chemicals, Inc. (NYSE:
), Monsanto Company (NYSE:
), Praxair, Inc. (NYSE:
), and Airgas, Inc. (NYSE:
) added 3.9%, 2.2%, 1.6% and 1.3%, respectively.
ALCOA INC (AA): Free Stock Analysis Report
AIR PRODS & CHE (APD): Free Stock Analysis
AIRGAS INC (ARG): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
PRAXAIR INC (PX): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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