Good, but not impressive results expected for companies

On Wall Street, stock prices rose on Wednesday after two days of decline, as investors were encouraged by a good start to the earnings season for companies.

The Dow Jones index strengthened by 61 points, or 0.46 percent, to 13,390 points, while the S&P 500 index rose by 0.27 percent to 1,461 points, and the Nasdaq index increased by 0.45 percent to 3,105 points.

The rise in stock prices is attributed to a good start to the earnings announcement season for companies, leading the S&P 500 to once again head towards its highest level in five years, which it reached last Friday.

Investors were encouraged by slightly better-than-expected earnings results from Alcoa, which estimates that demand for aluminum could rise more than last year.

However, the stock price of the largest American aluminum producer fell by 0.5 percent, although it jumped by 1.3 percent immediately after the earnings announcement.

Despite the good start, not much is expected from the earnings season, given the weakness of the world’s largest economies, particularly the recession in the eurozone and Japan.

Although, as expected, the results for companies in the fourth quarter of last year should be better than in the third, they certainly will not be impressive.

In the latest Thomson Reuters survey, analysts expect that earnings and revenues for companies in the S&P 500 index in the last quarter of last year increased by 1.9 percent compared to the same period of the previous year, while in the third quarter, earnings rose by a meager 0.1 percent.

– The biggest question is what the revenues will be, and Alcoa achieved better revenues than expected, but also weaker than in the same period of the previous year. However, low expectations open up space for companies to positively surprise even if their results are not particularly strong – says James Dailey, portfolio manager at Team Asset Strategy Fund.

The caution of investors is indicated by below-average trading volume. On Wall Street, NYSE MKT, and Nasdaq, 6.1 billion shares changed hands yesterday, while last year the average daily volume was 6.4 billion.

Stock prices also rose on European exchanges yesterday. The London FTSE index strengthened by 0.74 percent to 6,098 points, while the Frankfurt DAX rose by 0.32 percent to 7,720 points, and the Paris CAC increased by 0.31 percent to 3,717 points.