Battered stocks recover some lost ground

Wall Street is dusting itself off after yesterday’s pummeling, with a modest rebound, as earnings continue to motor along solidly.

Although US stock indices have risen a fair amount today, it recoups just a fraction of yesterday’s losses, with the Dow up 0.63% or 97 points at 15,469 compared to a fall of over 300 points by end of play on Monday. The S&P 500 rose 0.81% while the NASDAQ 100 gained 0.94%.

Despite signs of slowing for US and Chinese manufacturing, higher volatility in most financial instruments and the rout in emerging-market currencies, investors can take some security from the way US earnings are turning out. With over half of the S&P 500 companies having reported already, around 69% have beaten estimates with earnings and 65% on the revenue side. With yesterday’s falls affecting share prices across the board, without any discernment for how things might look on a stock by stock basis, this naturally tempts buyers to pick off bargains, hence today’s bounce.

Further evidence of the wobble in US manufacturing was provided by a report on factory orders today, which showed the value of orders dropping 1.5% in December, after a 1.5% rise the month prior. This report can often be pulled around by orders in the transportation sector though, which can be volatile due to the expensive nature of the items, so it can often be worthwhile looking at the data excluding this component. Doing so with December’s numbers shows a 0.2% rise in orders, which implies the outcome isn’t quite as gloomy as the headline rate suggests.

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