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Markets were closed on Monday due to Martin Luther King Jr. Day. During the previous week, the Street had received promising economic data as well as encouraging earnings from major companies which pushed benchmarks higher. Market finished in the green for the third consecutive week. A batch of major companies, especially from the technology sector, will report their earnings this week.
During the previous week markets finished in the green led higher by encouraging economic reports and better-than-expected earnings reports from JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS) and General Electric Company (NYSE:GE). A report from the U.S. Census Bureau and the Department of Housing and Urban Development showed that housing starts touched a new high, the previous highest level having been achieved in June 2008. The U.S. Department of Labor reported that initial claims declined to their lowest level in five years. All these positive factors pushed benchmarks higher and the blue-chip index gained 1.2%, the S&P 500 added 1.0% and the Nasdaq surged 0.3% over the week.
Positive developments on the debt ceiling issue also boosted investor sentiment on Friday. Speaker John Boehner said House Republicans will seek to raise the US borrowing limit by three-months so that they can pressurize a Senate dominated by Democrats to pass a budget. This is a major change from the earlier Republican stance which entailed that increase in debt levels would have to be matched by budgetary cuts of equal size.
This will be a very crucial week for the technology sector as major technology companies will be reporting their quarterly results. Technology bellwether Apple Inc. (NASDAQ:AAPL) will declare its first-quarter results on Wednesday. Recently, Apple shares declined sharply and also touched their lowest level in nearly one year due to low demand for its products. International Business Machines Corp. (NYSE:IBM), Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) are also expected to report their results this week.
Better-than-expected results from major companies in the previous week have raised earnings estimates for the S&P 500 to 2.5% from the previous figure of 1.9% according to Thomson Reuters Data. But the current estimate is well below Reuters’ October’s earnings estimates of estimates 9.9%.
On the international front, markets also had some encouraging news from China in the previous week. The world’s second largest economy expanded at 7.9% in the fourth quarter from 7.4% in the third-quarter. In the year 2012, China’s GDP expanded at 7.8% which is sharply below 2011 growth of 9.3%. Low demand for Chinese products in the recent days has affected the growth of China.