US stocks meandered through a busy week of corporate earnings results, with two of the three major indices concluding the week essentially flat.
Analysts described the market as entering a “consolidation” phase where trade is choppy and investors still need to digest recent record peaks scored by the Dow and the S&P 500.
Sam Stovall, chief investment strategist at Standard & Poor’s Capital IQ, predicted the S&P 500 would soon breach 1,700, but would first need to overcome “psychological resistance” to the new benchmark.
“Like a rusty door, it takes several attempts before it finally swings open,” Stovall said.
The S&P 500 slipped 0.44 point to 1,691.65 at the end of week, essentially flat. The Dow rose a miniscule 15.09 (0.01 percent) to 15,558.83. The NASDAQ increased 25.55 (0.71 percent) to 3,613.16.
Stovall rated the week’s relatively light calendar of economic reports as a “net positive,” with strong results in new-home sales and durable goods outweighing a disappointing report on existing-home sales. He also cited a report of European business sentiment from survey firm Markit as suggesting a better outlook for Europe.
The week was instead dominated by a diverse set of company reports on everything from industrial heavyweights like Boeing and Ford, to technology players like Amazon and Netflix, to big financial players like Travelers and Visa.
Within this plethora of reports, a few stood out as particularly influential. Apple’s earnings, while 22 percent below last year’s level, cheered the market after profits exceeded expectations by US$0.16 at US$7.47 per share.
Apple shares have slumped in recent months, but some analysts expressed confidence the company would soon introduce more appealing products that should drive sales. Apple shares closed the week 3.8 percent higher.
Even more impressive was Facebook, which vaulted nearly 30 percent higher on Thursday after an earnings report ended doubts about the company’s ability to garner advertising revenue from mobile technology. Analysts cooed that the results were “stunning” and among the best technology earnings results since the financial crisis.
The market was considerably less enthused by Caterpillar’s earnings report, which helped drive the Dow into negative territory on Wednesday. The big industrial has been badly hit by the global slowdown in mining, missing analyst profit forecasts by US$0.25 per share and slashing its profit and revenue forecasts for this year.
Overall, more big companies have exceeded expectations than lagged them. Analysts now forecast that S&P 500 companies will see earnings rise by 4.5 percent, whereas analysts saw profit growth of 3.2 percent before earnings season got under way, according to S&P Capital IQ.
Next week will see a busy week of economic indicators headlined by Wednesday’s report on second-quarter GDP and Friday’s all-important reading on the jobs market.