The keenly awaited US earnings season is upon us, with the first burst of updates due in from Monday 12 July.
Positive statements from a range of US firms could provide a welcome antidote from the less pleasing economic data we've been seeing in recent times. As a result of the recent weak indicators, fears of a double-dip recession have been rekindled, and global markets have stuttered.
Markets in decline?
In the US, the Dow Jones was understandably hit by poorly received US data last week - the index slid by 4.7% after weak employment, home sales and consumer confidence figures. The decline has been on the cards for a while - during this year’s second quarter to the end of June, the S&P 500 fell close to 12%, which translated at its weakest showing since the final three months of 2008. [1] A couple of weeks earlier in Japan, the Nikkei fell 4% in a day - its biggest fall in 14 months.
Could positive earnings data boost sentiment?
In the first quarter of 2010 US firms performed especially well, with a series of better-than-expected figures from the likes of Intel, Goldman Sachs and Morgan Stanley. Investors will now hope for more of the same as the Q2 reporting season kicks off.
A recent survey of analysts by Thomson Reuters suggested second-quarter figures are expected to be 27% up year-on-year. [2] If these expectations are proved correct, it will be a third quarterly period in succession which has seen results improve compared to the same three months the year before.
The upbeat forecasts should be a welcome relief for traders looking for tangible signs that the current downtrend can be halted. However the prospects for growth are aided by the discouraging data last year, when the US economy was struggling against recessionary forces. Some investors may therefore be weighing up just how healthy companies’ balance sheets really are, in view of the weakness witnessed a year ago.
Whatever the outcome of firms’ results over the next few weeks, investors will be keeping a close eye on statements regarding expectations for the rest of the year, to gauge whether any financial growth potential is likely in the longer term. Week commencing July 12, watch out for updates from, among others, Alcoa, Intel and Google, plus banking giants JP Morgan Chase, Bank of America and Citigroup.
Take a position
Whether you feel that a round of upbeat US earnings can kick-start a global share price recovery, or that the reception will be muted in the face of macroeconomic data suggesting a double-dip recession could be on the cards, you can take a view with IG Markets.
Trade CFDs on a vast number of stock indices from around the globe, including all the leading Asian, US, and European indices. You can also take a position on individual shares, selecting from thousands worldwide.
Updated: 09/07/10
Source: [1] Financial Times (5 July 2010)
Source: [2] Financial Times (5 July 2010)
The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.