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Great news on earnings and Europe

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by Peter Switzer

Great US company earnings and much improved economic news out of Europe set Wall Street up for a triple-digit move on the Dow, with that index up over 201 points to 10,322.3. The Nasdaq put on close to 2.7 per cent and the S&P 500 went up 2.25 per cent.

It was a great day for bulls and optimists, but can it last?

So what we are talking about is the best day for stocks in New York for two weeks and, if the S&P can resist gravity, it could be the best monthly gain since July 2009.

While volume was not huge, advancers beat decliners to the tune of six to one and the companies reporting revealed demand was on the rise and the prices charged were also heading in the right direction. It was really a nice report card from significant US companies.

Helping the market head up were Caterpillar and UPS — two great bellwether companies — which both reported brilliantly and raised guidance as well.

In addition, AT&T and 3M both painted very positive pictures going forward and transport stocks were up strongly, which is always a nice forward indicator.

On top of this, Europe came in with better-than-expected economic news, which has surprised those negative on the continent.

On the downside, after the close Amazon’s earnings disappointed and its stock dived 14 per cent. Against this, American Express beat the tipsters on earnings per share and revenue came in on expectations. And in late, late trade, Microsoft beat on the earnings per share estimates, as well as the revenue.

This day on Wall Street should ramp up our share prices today and, if the European bank stress tests can create an optimistic outlook for the EU’s financial system, next week we could have a big rally.

However, if they disappoint then we go back to square one, where we were before US company earnings socked it to the bears, the short-sellers, the hedge funds and the doomsday merchants in the media.

Go Europe!

For advice you can trust, contact Switzer Financial Services.

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Published on: Friday, July 23, 2010