Saturday, July 25, 2009

US Market Update

US Markets Weekly Recap - Week ending 24-Jul-09

The US stock markets logged another impressive week as investors cheered better-than-expected earnings reports, with the S&P 500 surging 4.1%, marking an 11% gain since July 10.

The best performing sectors were materials (+8.1%), energy (+5.6%) and utilities (+5.6%).

The week got off to a positive bias on report from The Wall Street Journal that CIT Group (CIT) had reached an agreement with its bondholders to secure $3 billion in rescue financing, which was later confirmed by the struggling lender. Whether CIT will be able to avoid bankruptcy remains to be seen, although this will give the lender some time to explore its options.

With only a handful of economic releases, the main focus this week was the large amount of earnings reports -- 142 S&P 500 companies reported their quarterly results, including 12 Dow components.

Earnings for the most recent quarter largely came out ahead of expectations, with 111 beats, 10 in-line and 21 misses. But the earnings beats were largely due to cost cutting measures, not upside surprises on the top line. Specifically, 72 companies posted revenue that failed to live up to expectations, and 102 reported year-over-year declines in revenue.

For instance, Microsoft met analyst EPS estimates in its fiscal fourth quarter at $0.36, but the software giant's revenue decline of 17% y/y to $13.1 bln was well short of the $14.4 bln consensus. Shares of MSFT fell 4.0% for the week.