This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
The Dow and S&P were boosted by Pfizer’s quarterly earnings, which beat estimates. Shares in the drugmaker rose 0.8%. Rival drugmaker Merck, tire-maker Goodyear, and insurer Aetna were among other companies that beat earnings estimates. Herbalife rose 1% after beating estimates for both earnings and revenue when it reported after the market shut last night. The company also raised its earnings guidance for the full year. Eastman Chemical rose 7% after also raising its full-year guidance.
On the macroeconomic front, data today showed house prices rose again in May. The Case-Shiller home price index increased by a seasonally-adjusted 1.0% in May, with only two cities out of the 20 measured by the report seeing overall price declines. Dallas and Denver exceeded their pre-financial crisis peaks to hit new record price levels. Despite signs that rising mortgage rates may be starting to impact the housing market (for example, yesterday’s drop in pending home sales), housing remains a cornerstone of the US economy and the continued trend of rising prices should further enhance consumer optimism and ultimately feed into the jobs market.
The Conference Board’s consumer confidence index slipped slightly in July, falling from June’s post-financial crises high of 82.1 to 80.3. The current conditions component was strong though, as was elements of the index relating to current employment. The headline number was dragged down by the expectations component.
This latest rash of companies outstripping expectations with their earnings shows that fears of a terrible earnings season have been unfounded so far, and makes current valuations look justified, as high as they are. Macro data has been solid and this provides further support to the market, but we are unlikely to see any significant moves in the market before tomorrow, when we have US second-quarter GDP data and the outcome of the Fed meeting which began today.