US stocks ended the week higher on Friday, getting a boost from the eurozone’s agreement to bail out debt-ridden Greece and from several blockbuster company earnings reports.
The Dow Jones Industrial Average climbed 1.61 percent for the week to close at 12,681.16.
The broader S&P 500 rose 2.19 percent to 1,345.02, while the tech-heavy NASDAQ Composite — fuelled by healthy profits from Apple and Microsoft — rallied 2.47 percent.
Apple shares gained 7.8 percent this week after the tech giant reported that second-quarter profits more than doubled to US$7.31 billion, translating into US$7.79 a share from a year earlier. This figure exceeded the US$5.87 predicted by analysts on average
Microsoft was up 2.8 percent for the week after it reported record revenue, thanks in part to impressive sales of its Xbox gaming console.
Industrial giant Caterpillar was among the week’s losers, falling 3.9 percent for the period after its profits fell short of expectations.
Next week, investors’ attention will be focused on the drama playing out in Washington, where Democrats and Republicans are locked in a stalemate over raising the US government’s US$14.29 trillion debt ceiling.
The White House has warned that failure to reach a deal by Aug. 2 could force the US Department of Treasury to default on its debts, which would roil financial markets and possibly cause another recession.
Conventional wisdom on Wall Street is that an agreement will be reached, averting a catastrophic default, said Ajay Rajadhyaksha, managing director for fixed income at Barclays Capital.
“The market still believes that there will be a deal that raises the debt ceiling at the very last minute, just as there was to keep the government running earlier this year,” Rajadhyaksha said.
Besides the debt talks, investors will also be watching a series of earnings reports for information on how major US companies are faring amid a sluggish economy.
Automaker Ford reports -quarterly results on Tuesday, followed by aircraft manufacturer Boeing and Delta Air Lines on Wednesday.
Energy giant ExxonMobil reports earnings on Thursday, followed by fellow oil company Chevron and pharmaceuticals maker Merck on Friday.
Friday will also be the day when the US Federal Reserve publishes its estimate of US second-quarter GDP growth.
Economists expect a low figure, following the near-stalled 1.9 percent pace of the first quarter.
Still, markets are likely to rally as soon as politicians reach a deal to raise the debt ceiling and reduce the US federal deficit, much as they did after the Greece bailout was announced this week, analysts said.
“If the market can get a deal done in the US, a budget reduction in the books, I think the market will focus on the positive aspects of the earning reports,” said Marc Pado, US market strategist for Cantor Fitzgerald. “If the economy changes, if the economic perception changes, the market could jump considerably.”
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