As we moved into the heart of the third quarter earnings season, the majority of stocks headed northward as the earnings picture is apparently beginning to show signs of improvement. Although there were some disappointments, such as Apple’s first earnings ‘miss’ since 2003, as well as tepid results from IBM and eBay, the norm was better-than-expected tallies. One such example was McDonald’s, which saw its stock hit an all time high and has been the best Dow performer by far since it hit its low back in 2003. Other than earnings, the big story continues to be the optimism concerning the European sovereign-debt crisis. As it now stands, there will be meetings this weekend and this coming Wednesday, to see if the European Union will come up with some type of plan to bolster the region’s banks and prevent the debt crisis from spreading beyond Greece to the far bigger economies of Spain and Italy.
As stock prices continue to improve, albeit in a hesitating manner, the Dow Jones Industrial Average still managed to rise by 1.41% last week to finish at the 11,808.79 mark. Meanwhile, the broader Standard & Poor’s 500 index racked up a 1.12% gain, to finish at 1,238.25. However, not all of major domestic joined in the party as the Nasdaq Composite unfortunately bucked the trend, as it fell by 1.14% to 2,637.46. In addition, the smaller-cap stocks, as represented by the Russell 2000, were basically unchanged as this index dropped by 0.01%.
The big question that faces investors, is whether the ‘bears’ have finally left us? While the market is stronger than it was earlier this year, there are still plenty of hidden – and not-so-hidden – risks out there. Thus, look for more volatility in the near term, as we continue to digest the ongoing saga of the European debt crisis and the bigger earnings picture here domestically. As we close out the month of October this week, there obviously will continue be a tug-of-war between the ‘bears’ and the ‘bulls,’ so try not to get too ‘spooked’ by this market action. Until next week, take care!!
Sources:Barron’s, Wall Street Journal, Associated Press, Econoday, Gorilla Trading, Dow Jones & Company, Briefing.com