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Stronger-than-expected corporate earnings results negated concerns sparked off by dismal economic data to lift the benchmarks higher on Friday. Even though Friday’s gains were anything but robust, they were sufficient to take the Dow into the positive zone for the month. Corporate results not only pushed the benchmarks higher on Friday, but lifted the benchmarks to their best weekly performance since mid-March. These gains are also attributable to encouraging housing data.
The Dow Jones Industrial Average (DJI) gained 0.2% and closed the day at 13,228.31. The Standard & Poor 500 (S&P 500) also gained 0.2% and finished Friday’s trading session at 1,403.36. The tech-laden Nasdaq Composite Index jumped 0.6% to move up to 3,069.20. The fear-gauge CBOE Volatility Index (VIX) edged up 0.5% and settled at 16.32. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were 6.2 billion shares, lower than this year’s daily average of 6.76 billion shares. Advancing stocks enjoyed an upper-hand over the decliners; as for every two stocks that gained on the NYSE, only one stock moved lower.
Amazon.com Inc. (NASADQ:AMZN) and Expedia Inc. (NASDAQ:EXPE) both reported robust results that breezed past the Street estimates. For instance, Amazon reported earnings that were over 300% higher than what analysts had projected. This whopping earnings surprise helped Amazon end 15.8% higher at $226.85 a share. Expedia too came out with encouraging figures, beating earnings and revenue forecasts. Shares of Expedia soared 23.5%. These solid gains were well reflected by the broader markets as investors chose to ignore a dismal first-quarter GDP report.
The Bureau of Economic Analysis reported the "advance" estimate for gross domestic product (GDP) growth, where it stated: “Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.2 percent in the first quarter of 2012”. Consensus estimates had projected an increase of 2.5%. The less-than-expected increase could have been a drag on the sentiment, but the earnings results negated the concerns.
Corporate results have been largely positive so far. Thomson Reuters data confirms that roughly 73% of the companies have topped estimates till now. Considering the week ending on April 27, earnings have played a big role in boosting the benchmarks’ weekly performance. Justifying the earnings’ strength during the week, data from Thomson Reuters showed that S&P 500 earnings growth had moved to 7.2% during the week, up from 3.2% at the beginning of April.
Meanwhile, bellwethers like AT&T, Inc. (NYSE:T), United Technologies Corp. (NYSE:UTX) and 3M Co. (NYSE:MMM) came out with strong results and lifted the broader sentiment. On Wednesday, tech-bellwether Apple Inc. (NASDAQ:AAPL) joined the list after its earnings soared 92.2% year-on-year, while revenues jumped 59.0% year over year, and surpassed the Street’s estimates by a wide margin. The iPhone and iPad maker’s robust results powered the Nasdaq to its best performance this year, and eventually the tech-laden index posted its best weekly gains in almost three months. Encouraging housing data on Thursday also added to the benchmarks’ gains for the week and the Dow, S&P 500 and Nasdaq jumped 1.5%, 1.8% and 2.3%, respectively, for the week. The Dow and S&P 500 had their best weekly run since March 16.
Weekly gains can also be attributed to e the Federal Reserve Chairman’s comments on Wednesday that the central bank "would not hesitate" to bolster the economy if needed. After a meeting with Federal Open Market Committee in Washington, Ben Bernanke had said: “We remain prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target”. As investors hoped for a third-round of bond purchases, Bernanke fuelled optimism by saying: "Those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support".