Industrials Earnings Drive U.S. Indexes at Multi-Year Highs

Bikram Pandey
26 Apr, 2011
New York City

U.S. stocks extended gains for the fifth day after industrial companies reported higher earnings. The latest increase in earnings was driven by the increase in overseas profits and the weak dollar. The S&P 500 index traded at high last seen in July 2008 and the Russell 2000 index at July 2007 peak.

[R]5:30 PM New York – U.S. stocks extended gains for the fifth day after industrial companies reported higher earnings. The latest increase in earnings was driven by the increase in overseas profits and the weak dollar. The S&P 500 index traded at high last seen in July 2008 and small cap focused index flirted with the July 2007 peak.[/R]

U.S. stocks extended gains for the fifth day after earnings from industrial companies released better than expected. Ford, Coca-Cola, 3M, Cummins and UPS reported higher earnings.

The broad advances in the market put the S&P 500 and Russell 200 indexes at a new high for the year. The small companies focused Russell 200 indexes flirted with the high last seen in July 2007.

The stronger earnings from the industrial companies provided a better insight to the economic health. Many of the global companies reported sharply higher companies but the increase was driven by the growth in emerging markets, Asia and Europe.

Home prices fell 3.3% in February, according to the latest indicator that measures prices in the largest twenty metropolitan cities. The decline in the prices was expected but the index dropped to the lowest last seen in April 2009, when the housing market collapsed.

The weakness in the housing market though was anticipated highlighted the persistent weakness in the real estate sector. The housing prices declined as the banks are pulling back from foreclosures, rates are at the lowest and home prices have declined more than a third since 2006.

On the earnings front, 3M Company first quarter net income rose to $1.08 billion, Cummins first quarter net income soared to $343 million and Ford Motor first quarter net income grew 22% to $2.55 billion.

Coca-Cola first quarter net income rose 18% to $1.90 billion and United Parcel first quarter net income surged 66% to $885 million.

Across the Atlantic, euro-zone government deficit contracted in 2010. Swiss trade surplus increased in the first quarter. Sweden jobless rate fell in March. Czech economic sentiment weakened in March.

The government deficit of the euro area fell to 6% of gross domestic product in 2010 from 6.3% in 2009, data from the Eurostat showed today.

The EU27 government deficit declined to 6.4% of GDP in 2010 from 6.8% in 2009. The government debt to GDP ratio rose to 80% at the end of 2010 from 74.4% at the end of 2009.

The European indexes gained after Puma estimated sales of €3 billion for the year and UBS said client fund inflows were the highest since the end of 2007. Aegon agreed to sell Transamerica Reinsurance unit to Scor for $1.4 billion.

The UK indexes traded higher after the Confederation of British Industry forecasted manufacturing recovery firmly on track. Irish manufacturing output price inflation accelerated in March. Pearson agreed to acquire Schoolnet for $230 million.

Stocks in Japan continued to drift lower ahead of earnings, a week long holiday and central bank rate decision this week.

The Bank of Japan is expected to expand its 3 trillion yen bond program to support the rebuilding effort. Automakers declined and shipping lines closed lower a day after surging.

Stocks in Mumbai declined sharply in early trading but managed to rebound. The Sensex closed down 0.2% after dropping as much as 1.4%. The rupee gained and silver fell nearly 3% after trading above Rs 70,000 level for the third day in a row.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 3.31% and 30-year bond fell to 4.39%.

The U.S. dollar decreased to $1.462 to a euro and fell against the Japanese yen to 81.57 yen.

Immediate delivery futures of Texas crude oil decreased $0.43 to $111.78 a barrel, of natural gas increased 0.001 cents to $4.388 per mbtu and gasoline prices increased 3.43 cents to 335.72 cents a gallon.

In metals trading, copper prices decreased 0.55 cents to $4.34 per pound, gold increased $4.00 to $1,507.50 per ounce and silver increased $0.57 to $45.65.