Fundamentals

Corporate Earnings Drive US Equities Higher

U.S. Session Key Developments

•    Corporate Earnings Continue To Beat Expectations
•    Commodities Higher As Dollar Pullbacks
•    Obama Proposes Plan To Help Small Businesses

US Stocks posted significant advances for the second straight day as Corporate America is on track to report one of the best quarterly earnings seasons on record in terms of how many companies beat expectations with their profits.  Today alone, nineteen of the twenty-two S&P 500 companies that reported had better than expected profits.  D.R. Horton Inc., the second-biggest U.S. homebuilder by revenue, posted a 318 percent earnings surprise, the biggest one today.  With data showing that monthly pending home sales increased one percent in December, signs point to a recovering housing sector.  In addition to stocks, commodities also gained for the second straight day with the CRB commodity index up almost three percent over the last two sessions.  March crude contracts traded to 77.02, up 3.5 percent today and up about 7 percent this week.  Gold was also higher to 1,114, up almost one percent in the session.  The move in commodities was facilitated by a weak dollar, which was lower against 9 out of the 10 G10 currencies.  The Australian Dollar was the major exception after the Reserve Bank of Australia defied forecasts by maintaining its cash rate at 3.75 percent.  As investors await this Friday’s Non-Farm Payrolls figure, President Obama intensified his focus on job creation by announcing a plan to redirect $30 billion in repaid TARP bailout loans to small community banks in hopes of making it easier for them to lend to small businesses.  Republicans criticize the plan as they had tapped those funds to bring down the budget deficit.

DJIA 30                      10,296.85                   +111.32                       +1.09%
The Dow Jones Industrial Average was up over 1 percent for the second straight day.  General Electric Co. was the top performing component of the index after the company’s backup engine for the F-35 Joint Strike Fighter won support from the Armed Services committee chairman after Defense Secretary Robert Gates excluded it from the Pentagon’s 2011 budget proposal.  The company’s shares were up 3.69 percent to 16.85.

S&P 500                      1,103.32                       +14.13                         +1.30%
The broad-base S&P 500 was the best performer of the three major indices, closing back above the psychologically-significant 1100.  All 10 of the index sectors were in the green with all but 3 posting gains over 1 percent.  Health Care was the top performing sector, up 1.92 percent, even as President Obama urged Congress to push his health-care initiative through the House of Representatives.  Lawmakers warned that further delay could jeopardize passage.

NASDAQ                     2190.06                      +18.86                         +0.87%
The Nasdaq Composite Index was higher today after technology stocks, which hold by far the most weight, gained 0.79 percent on the day.  Adobe Systems Inc. gained 1.54 percent after its chief technical officer criticized Apple for not supporting Adobe Flash on its iPhone and iPad devices.  Apple, which is the only smartphone provider that does not support Flash, saw its shares gain 0.58 percent in today’s session.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com