All eyes are on Europe today, where leaders are expected to announce the much-delayed plan to tackle the common currency’s problems. And while we wait for news out of Europe, the positive tone of this morning’s earnings reports from a number of key companies and the monthly Durable Goods reading should keep the market mood favorable.
Last night’s Amazon (AMZN) miss notwithstanding, the overall tone of earnings reports thus far in this reporting cycle in general and this morning in particular has been reassuringly positive. There are still some lingering questions about next year’s earnings expectations, but overall the earnings picture remains strong.
This morning’s September Durable Goods report came roughly in-line with expectations on the ‘headline’ basis, but was significantly better than expected on the ‘core’ basis. The ‘core’ number, which strips out the volatile transportation and defense equipment, serves as a proxy for business capital spending.
The ‘core’ reading, also called nondefense capital goods excluding aircraft, rose a better-than-expected 2.4% in September, after August’s 0.5% gain. This report, admittedly a very volatile metric on a month-to-month basis, is another confirmation of momentum on the manufacturing front following the summer lull.
Of the key earnings reports this morning, Ford (F) handily beat earnings and revenue expectations, with attention now shifting to when the automaker will be reinstituting its dividend. Sprint (S) came out with a narrower than expected loss on in-line revenue, with response to the launch of iPhone reportedly surpassing the company’s expectations. Sprint launched the iPhone 4S after the quarter ended, so the device’s full impact will become obvious in the next quarterly results. We also have positive surprises from ConocoPhillips (COP), WellPoint (WLP) and Lockheed Martin (LMT).
Amazon came out with terrible results after the close on Tuesday, as heavy spending ate sharply into the retailer’s margins, resulting in an earnings miss on in-line revenue. Even more disconcerting was Amazon’s cautious outlook for the sesaonally strong fourth quarter.
The earnings strength and economic momentum will get discounted if the European leaders fail to come through with the promised plan. No one is expecting an overnight solution to Europe’s problems, but the broad outlines of the under-discussion plan offers a good enough chance of tackling the issues on all fronts.
AMAZON.COM INC (AMZN): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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