Profits ride to Wall Street's rescue as markets jump
NEW YORK -- Profits, the lifeblood of Wall Street, are showing signs of a comeback — injecting new life into the stock market.
With expectations low and analyst anxiety high, surprisingly strong profit reports from a handful of America's blue-chip companies early in the second-quarter earnings season is reviving both investor optimism and confidence.
The Dow Jones industrial average has surged almost 500 points in the past three sessions, including Wednesday's 257-point jump, or 3.1%, to 8616.
Positive comments about future business prospects from tech industry leader Intel late Tuesday have rekindled hopes for an economic recovery later this year. Belief in a better tomorrow is helping restore faith in the "green shoots" recovery thesis that had lost some traction recently amid a still-weak jobs market and consumer confidence.
A stock market that was in dire need of news that was just plain good — and not just less bad — is getting just that this earnings season, at least so far.
"Less bad no longer works," says Bryan Place, president of Place Financial Advisors. "We need true earnings to justify share prices (moving higher). So far, that is what we have seen."
Despite the strong early results, it is too early in the reporting season to declare that the profit recession that began in the third quarter of 2007 is easing. Heading into the week, analysts polled by Thomson Reuters expected earnings to be down more than 35% for the April-June quarter. Profit growth is not expected to resume until the fourth quarter.
For stocks to keep rallying, other bellwethers that report earnings this week, such as tech titans Google and IBM, and financial firms such as JPMorgan Chase, Citigroup and Bank of America, must also deliver better-than-expected results, says Chris Johnson, chief investment strategist at Johnson Research Group.
