Week in Review: Positive Earnings Help Wall Street Close with Slight Weekly Gains

Signs the second quarter measurably improved upon a dismal first quarter kept hopes high on Wall Street this week.
By Keris Alison Lahiff ,

Signs the second quarter measurably improved upon a dismal first quarter kept hopes high on Wall Street this week. The Dow Jones Industrial Average enjoyed a record-breaking stretch this week, closing three of the five days at all-time highs.

A wave of positive earnings helped to fuel positivity on markets for much of the week. The earnings season is now more than a quarter of the way through and, while S&P 500 companies are still in an earnings recession, most analysts expect this quarter to act as a bottom for a recovery.

The second-quarter blended earnings estimate is for contraction of 3.8%, according to Thomson Reuters, slowing from 5% contraction in the first quarter. Excluding energy, earnings improved to 0.1% growth, a sign the earnings recession is on the mend.

Equities' gains weren't large, but they were enough to push the S&P 500 to a new record. Since Monday, the S&P 500 added 0.54%, the Dow gained 0.3%, and the Nasdaq rose 1.3%.

Next week's FederalReserve meeting also preoccupied investors. The central bank is expected to stand pat on interest rates when members convene for a two-day meeting on Tuesday.

"We think the current run-up in the U.S. market is sustainable based on the likelihood that the Fed is on hold indefinitely and the expectation of improving earnings in the second half of the year," Louis P. Abel, chief investment officer at First Foundation Advisors, told TheStreet.

The Dow closed at its seventh straight record on Wednesday, landing at an all-time high of 18,595.03, before snapping its streak on Thursday. The S&P 500 also closed at a record high of 2,175 on Friday. Both have shown few signs of a further retreat from current levels.

"We are cognizant that global macro events -- such as a further slowdown in Europe or China -- could cause yet another pullback in the U.S. market," added Abel. "However, given the general health of the U.S. economy, we would view a pullback as likely temporary and therefore a potential buying opportunity."

Among the better-than-expected earnings reports out this week, General Electric (GE) - Get Report bested estimates as it shook off weakness from its oil and gas and transport equipment units. Chief financial officer Jeff Bornstein said just 15% of its business was "going through a very difficult cycle."

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General Motors (GM) - Get Report rose after breezing past quarterly estimates. The U.S. automaker reported a 157% jump in net profit in its second quarter as strong truck demand boosted sales. Sales in Europe also improved, leading GM to report its first quarterly profit in the region in five years.

In tech, Microsoft (MSFT) - Get Report reported a better-than-expected quarter on the strength of sales in its cloud software unit. Cloud revenue increased 7% to $6.7 billion, nearly one-third of total sales. Qualcomm (QCOM) - Get Report exceeded estimates thanks to unexpected strength in its chips segment over its recent quarter. Mobile chip shipments totalled 201 million over the third quarter, above Qualcomm's target of between 175 million and 195 million.

The stragglers of the finance industry reported better-than-expected earnings this week. Morgan Stanley (MS) - Get Report topped estimates even as profit declined on volatile market activity. A rebound in bond-trading activity helped Goldman Sachs (GS) - Get Reportsurpass Wall Street earnings expectations. Bank of AmericaBAC rose 4% on Monday after exceeding analysts' low-ball estimates in its recent quarter thanks to a rebound in trading revenue.

There were earnings misses, too. Starbucks (SBUX) - Get Report , Pandora (P) , Chipotle (CMG) - Get Report , Southwest (LUV) - Get Report , Intel (INTC) - Get Report and Netflix (NFLX) - Get Report each released subpar reports. 

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Crude oil ended the week lower as a weekly increase in production and slower-than-expected declines in inventories kept commodities under pressure. The number of active rigs increased by 14 to 371 in the past week, according to Baker Hughes data. Ballooning global supplies and production have pummeled crude prices since last year.

West Texas Intermediate crude was 3.8% for the week, ending Friday at $44.19 a barrel. 

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