MARKET SNAP: At 6:15 a.m. ET, S&P 500 futures down 0.09%. 10-Year Treasury yield lower at 2.73%. Nymex up 0.65% at $100.93. Gold down 0.27% at $1315.1/oz. In Europe, FTSE 100 down 0.5%, DAX down 0.2% and CAC 40 down 0.51%. In Asia, Nikkei 225 up 3.13% and Hang Seng up 0.23%.
WATCH FOR: February NY Fed Empire State Survey (8:30 a.m. Eastern Time): seen 8.0; previously 12.5; February Housing Market Index: seen 56; previously 56. Analog Devices, Coca-Cola, Community Health, Duke Energy, Fresh Del Monte, Herbalife, La-Z-Boy, Medtronic, Panera Bread, Potbelly and Waste Management are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
Earnings season has provided surprisingly strong support for U.S. stocks over the past few weeks.
After slumping through January and early February, stocks have bounced back throughout the heart of earnings season. The rally has left the major indexes within shouting distance of new highs.
The average stock has risen 0.84% on the day of a company’s report (or the day after if the company reported after the closing bell), the biggest average gain since the middle of 2009, according to Bespoke Investment Group, a New York research firm. About 80% of S&P 500 companies have reported fourth-quarter results.
Companies are reporting strong profits, but continue to struggle on the top line. Fourth-quarter profit growth has registered at 9.6%, according to Thomson Reuters, while revenue growth sits at only 1.1%.
Earnings season continues this week with a heavy dose of momentum stocks—Herbalife Ltd. and Tesla Motors Inc. are scheduled to report on Tuesday and Wednesday, respectively. Retailers Nordstrom Inc. and Wal-Mart Stores Inc. are due to release results Thursday. Charter Communications Inc. and Dish Network Corp. are set to reportFriday.
The market’s rebound has come despite a series of economic reports showing the U.S. economy started 2014 weaker than most expected. Recent economic reports have shown softness in the jobs market, manufacturing and consumer spending.
Many investors have recently shrugged off the data due to the cold and snowy weather. As temperatures heat up, the hope is so will the economic data.
Both the Dow Jones Industrial Average and the S&P 500 last week registered theirbiggest weekly advances of the year. The rally left the S&P 500 0.5% from a record and the Dow 2.6% away from a new all-time high.
“One hallmark of the February offensive has been the ability for stocks to advance in the face of dismal or disappointing economic news,” says David James, director of research at James Investment Research, which manages about $5 billion in assets.
But many of the other concerns that weighed on the markets earlier this year—turmoil in emerging markets and cuts in Federal Reserve stimulus—haven’t changed. That’s why Mr. James is reluctant to get overly bullish about the market’s latest move.
“The market rising on bad economic news can be a good temporary sign,” he said. “Ultimately the markets will need good economic news. On a number of important items, this is just not happening.”
A decent earnings season, thus far, has been able to mask some of the downbeat economic data. With earnings season winding down, investors like Mr. James will need to see the economic data pick up again in order for the rally to maintain its recent momentum.
Morning MoneyBeat Daily Factoid: On this day in 2001, racecar legend Dale Earnhardt Sr. passed away after a devastating crash at the Daytona 500. He was 49 years old at the time of his passing.
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