US Quarterly Earnings

The keenly awaited US earnings season begins in earnest on Monday 12 July, with quarterly trading updates from Alcoa, Intel and Google, plus banking giants JP Morgan Chase, Bank of America and Citigroup due during the week.

A series of upbeat figures from a number of US blue-chip firms could provide welcome respite from recent weaker-than-expected economic indicators. The poorly received indicators have led to fears of a double-dip recession, and global markets have subsequently tumbled.

Declining Markets

After apparently sailing serenely away from the 5000 level and slowly but steadily upwards, the UK's blue-chip FTSE 100 index has been jolted by the choppy waters of ongoing eurozone debt concerns and worries over the European banking system, coupled with some disappointing economic data from the US and China. Last week the FTSE fell 208.38 points – a sizeable 4.1% – and down through the 5000 mark to close at 4838.09.

The poor recent performance of the world’s stock markets hasn't been confined to these shores alone though. Across the Atlantic, 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%, its weakest showing since the final three months of 2008. [1] A couple of weeks earlier the Nikkei fell 4% in a day – its biggest such fall in 14 months.

Can positive earnings data boost sentiment?

In the first three months this year, US firms performed particularly well, with a series of better-than-expected figures from the likes of computer chip-maker Intel and banking giants Goldman Sachs and Morgan Stanley. Investors will now hope for much of the same as the second-quarter earnings season begins next week.

In a recent survey of analysts by Thomson Reuters, the latest set of quarterly numbers are expected to be 27% up year-on-year. [2] If these forecasts are proved to be accurate, it will be a third quarterly period in succession where results have improved on a year-on-year basis.

The positive expectations will certainly be welcomed by traders looking for a tangible sign that the upturn witnessed over the past few days is sustainable. It should be noted though that the upbeat prospects for growth are aided by the weak figures from 2009, when the US economy was in recession. 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 the updates over the next few weeks, many will be closely eyeing expectations for the rest of the year in an effort to gauge whether any financial growth potential is likely in the longer term.

Take a view

Whether you feel that a round of positive US earnings can help to sustain a global share price recovery, or that the reception will be muted in the face of mounting macroeconomic data suggesting a double-dip recession is a real possibility, you can take a view with IG Markets.

Trade on a vast number of stock indices from around the globe, including the FTSE 100, Wall Street and US SPX 500, Japan 225 and Hong Kong HS42. You can also take a position on individual share CFDs, selecting from thousands globally.

Updated: 08/07/10

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.