The Markets This Week
STOCKS RALLIED HARD FOR A SECOND STRAIGHT week, egged on by hopes the economy might emerge from the crippling recession before the summer ends.
The unfolding earnings season continues to validate the notion that analysts had lowered their expectations too much. More than a third of companies have reported second-quarter earnings, says Thomson Reuters, and the crop beating estimates has swelled to 77% — versus 67% last week and a long-term average near 61%. Amazon.com (ticker: AMZN) and Microsoft (MSFT) disappointed investors, but companies from Apple (AAPL) to Texas Instruments (TXN) obliged, and even Ford eked out a $2.3 billion profit.
The knock, quite rightly, is that companies are surpassing estimates chiefly by slashing expenses and firing workers, which isn't as sustainable as expanding revenue. Yet companies that have cut costs to the bone stand to profit mightily when market demand recovers.
The Dow Jones Industrial Average rallied 349 points, or 4%, to 9093, and the 11.6% rise was its best two-week run since March 2000. The Nasdaq Composite's 12-day winning streak ended with Friday's 0.4% loss, but it tacked on 79 points, or 4.2%, to end the week at 1966. The Russell 2000 jumped 29, or 5.6%, to 548.
For the first time in a long while, Wall Street firms are nudging up their marks to catch up to or stay ahead of the market. In the past two weeks alone, Barclays Capital increased its year-end target for the S&P 500 to 930 from 760, Goldman Sachs raised its target to 1,060 from 940, Credit Suisse nudged it up to 1,050 from 920, while HSBC raised its bulls-eye to 1,020 from 900.
"We believe that we are halfway through the first V of an upward-sloping W-shaped recovery, with a likely peak in early Q4," writes a Wall Street analyst. With free cash flow at an all-time high, and U.S. investment's contribution to the economy as low as 12%, corporate spending should rise soon. Earnings are being revised upward for the first time since August 2007, valuations are neutral and 36% of the market's capitalization is in money-market funds. "In the long run, margins can't remain at abnormally high levels and de-leveraging has to occur," he adds. "But let's worry about that next year(Source: Barrons Online).
The unfolding earnings season continues to validate the notion that analysts had lowered their expectations too much. More than a third of companies have reported second-quarter earnings, says Thomson Reuters, and the crop beating estimates has swelled to 77% — versus 67% last week and a long-term average near 61%. Amazon.com (ticker: AMZN) and Microsoft (MSFT) disappointed investors, but companies from Apple (AAPL) to Texas Instruments (TXN) obliged, and even Ford eked out a $2.3 billion profit.
The knock, quite rightly, is that companies are surpassing estimates chiefly by slashing expenses and firing workers, which isn't as sustainable as expanding revenue. Yet companies that have cut costs to the bone stand to profit mightily when market demand recovers.
The Dow Jones Industrial Average rallied 349 points, or 4%, to 9093, and the 11.6% rise was its best two-week run since March 2000. The Nasdaq Composite's 12-day winning streak ended with Friday's 0.4% loss, but it tacked on 79 points, or 4.2%, to end the week at 1966. The Russell 2000 jumped 29, or 5.6%, to 548.
For the first time in a long while, Wall Street firms are nudging up their marks to catch up to or stay ahead of the market. In the past two weeks alone, Barclays Capital increased its year-end target for the S&P 500 to 930 from 760, Goldman Sachs raised its target to 1,060 from 940, Credit Suisse nudged it up to 1,050 from 920, while HSBC raised its bulls-eye to 1,020 from 900.
"We believe that we are halfway through the first V of an upward-sloping W-shaped recovery, with a likely peak in early Q4," writes a Wall Street analyst. With free cash flow at an all-time high, and U.S. investment's contribution to the economy as low as 12%, corporate spending should rise soon. Earnings are being revised upward for the first time since August 2007, valuations are neutral and 36% of the market's capitalization is in money-market funds. "In the long run, margins can't remain at abnormally high levels and de-leveraging has to occur," he adds. "But let's worry about that next year(Source: Barrons Online).
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