In up and down trading last week stocks ended the week with overall gains as a flood of corporate earnings reports provided a wide range of first-quarter results and projected profits. Data pointed to an easing in the pace of US economic activity while reports from the eurozone indicated somewhat brighter prospects. Compared with those of recent weeks, economic reports and earnings results were less stark and more nuanced, with an overall sense of subdued economic growth and moderate corporate earnings results.
Amid this environment the DJIA was up 1.4%, the S&P 500 was up 0.6%, the Russell 2000 was up 1.0%, the Global Dow ex-U.S. was up 1.0% and crude oil rose 0.2%.
The International Monetary Fund raised its forecast for global economic growth to 3.5% for 2012, up from a projection of 3.3% in January. The IMF predicts growth will accelerate to 4.1% in 2013. It raised its forecast for US economic growth to 2.1% this year and 2.4% next year. The IMF also foresees consumer price inflation of 1.9% this year and 1.7% in 2013 in advanced economies and an inflation rate of 6.2% this year and 5.6% next year in developing countries.
Several reports last week indicated a slowdown or stalling of the US economic recovery. The four-week moving average of initial jobless benefits claims rose by 5,500 to a seasonally adjusted 374,750, the highest level since late January, the US Department of Labor reported.
Existing-home sales fell 2.6% in March from a month earlier but rose 5.2% from a year earlier. Sales of existing homes had their strongest first quarter since 2007. Home construction fell 5.8% in March from February, according to the US Department of Commerce, far below expectations, but the number of new housing permits rose by 4.5% in March.
US industrial output was flat in March, the US Federal Reserve Board reported.
The eurozone swung to a trade surplus in February on the fourth consecutive monthly increase in exports, improving hopes of an economic turnaround for the troubled region. The €2.8 billion trade surplus compared favorably with a €7.9 billion trade deficit in January and a €2.8 billion deficit in February 2011, the European Union’s statistics agency reported.
Economic expectations in Germany improved slightly in April, according to the Center for European Economic Research (ZEW). Only 15% of financial experts polled by ZEW said they expected Germany to enter a recession in the next two quarters compared with 30% at year-end 2011.
Japan registered a trade deficit in March after posting a surprise trade surplus in February for the first time in five months. Japan’s exports to China declined 5.9% while its exports to the United States rose 23.9%. Overall exports rose 5.9% from a year earlier while imports grew 10.5%.
India cut its benchmark interest rate by a larger-than-expected one-half percentage point, attempting to stimulate growth.
General Electric’s first-quarter earnings fell 12% from a year earlier on an 8.2% decline in revenue. A key factor was its sale of media business NBC Universal. Accounting for the impact of NBC Universal, GE’s revenue rose 4.4%.
Microsoft’s fiscal third-quarter earnings fell 2.4% from a year earlier, largely because of weakness in its entertainment business, which includes the Xbox video game console, as the gaming console market slumped.
Intel beat expectations despite a 13% drop in first-quarter earnings as it spent more on research and marketing while revenue was flat.
Several large banks took billions of dollars in accounting charges related to the value of their debt.
- Bank of America reported a 68% lower first-quarter profit than a year earlier because of a $4.8 billion accounting charge. However, excluding the charge, its earnings per share far surpassed analysts’ expectations. Revenue for the banking giant fell 2.8%.
- Morgan Stanley swung to a loss because of the write-down. Excluding the charge, Morgan Stanley posted a 20% growth in earnings on revenue growth of 14%.
- Citigroup reported a slight decline in net income from a year earlier while its revenue barely grew. However, its investment banking and capital markets businesses rebounded.
- Investment bank Goldman Sachs beat a lowered expectations bar, performing better than expected in the first quarter, but its profit fell 23% from a year earlier while revenue declined 16%.
- Large regional bank US Bancorp posted a 28% increase in first-quarter profit on sharply reduced credit costs and surprisingly good revenue growth. Lending surged in real estate and commercial borrowing while loan-loss provisions fell substantially from a year earlier. The bank’s revenue rose 9.1%.
BlackRock, the world’s largest asset manager, beat expectations with a 9% gain in earnings per share in the first quarter. Its assets under management rose to $3.7 trillion from $3.5 trillion in the previous quarter. However, its operating margin fell 1.4 percentage points. IBM reported a 7% increase in first-quarter net income and 9% growth in operating earnings, beating expectations. However, its revenue was stagnant and missed analysts’ forecasts.
eBay reported a 20% improvement in first-quarter earnings and revenue growth of 29%, both better-than-expected results, as it continues to work on a multi-year turnaround that began in 2009. Healthy performances across the board contributed, including PayPal revenue growth of 32% from a year earlier. EBay also upgraded its full-year earnings forecast.
Coca-Cola reported healthy earnings growth of 7.9%, with sales growth in all operating regions along with higher prices. Revenue rose almost 6% as worldwide unit case volume grew by 5%.
Pharmaceutical and health care firm Johnson & Johnson posted a 13% increase in firstquarter profit, benefiting from a $106 million gain on currency exchange rates associated with a planned $21 billion acquisition of medical device maker Synthes. Excluding that gain and other items, the company’s earnings rose slightly and revenues were down 0.2% from a year earlier.