This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Market Preview: Finding Reason to Rally

Stocks in this article: GOOGIBMSPYQCOM^GSPC^IXIC^DJI

NEW YORK ( TheStreet) -- The early returns on second-quarter reporting season are bearing out the idea that low expectations make for easy success.

After skidding for much of last week, the major U.S. equity averages have all found reason to rally. Whether it's the stubborn insistence of traders to find a way to twist whatever comes out of the Federal Reserve into a justification for eventual quantitative easing or else latching onto positives in the mixed earnings reports thus far, stocks are finding buyers again.

The Dow Jones Industrial Average, now up in three of the past four sessions, is back in positive territory for the month. The S&P 500 hit 1375 on Wednesday, its best intraday level since May 7, and the Nasdaq, thanks to its 1%-plus gain, looks primed to make a run at 3,000.

Earnings would appear to have a lot to do with it as companies are turning negatives into positives. Intel (INTC) getting a bump out of a lower revenue outlook being a prime example. Qualcomm (QCOM) pulled off the same trick after the bell on Wednesday, rising nearly 7% in extended trades after missing in its latest quarter and giving a below-consensus outlook.

According to data from Thomson Reuters, 71% of the S&P 500 companies that have reported so far -- roughly 13% of the index's components as of Wednesday morning -- have topped analyst expectations. Eleven percent have matched and 17% have missed. That's better than the historical quarterly averages of 62%, 17% and 20% respectively since 1994.

Possibly of more importance is that profit growth has held steady. The blended year-over-year earnings growth rate -- reflecting actual results and shifting analyst estimates -- sits at 5.9% for the quarter, down just a fraction from 6% as of July 1.

There's some sentiment building that all the bad stuff was baked in by the swoon earlier in the month with the potential negatives -- Europe's debt crisis, a mediocre second quarter, the fiscal cliff, softness in the economic data -- getting exposed and talked to death without much actual news to drive the trading. That may have opened up some room to run.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,380.41 +263.17 1.63%
S&P 500 1,886.76 +24.00 1.29%
NASDAQ 4,258.4380 +41.0480 0.97%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs