A slew of positive earnings reports from technology giants propelled U.S. stocks higher Thursday, shrugging off more lackluster economic news.
The Dow Jones Industrial Average gained 34.7 points, or 0.3 percent, while the broad S&P 500 Index was up 3.7 points, or 0.3 percent. The technology-heavy Nasdaq Composite Index was 23.3 points, or 0.8 percent, higher.
This corporate earnings season has shown that most companies are beating Wall Street analysts’ slightly downtrodden projections, and Thursday was no exception.
International Business Machines Inc. (IBM) was the top dog, as Big Blue’s earnings rose 6 percent despite a topline revenue drop of 3 percent in the April–June quarter. With its breadth and reach, IBM was able to shrug off the impact of contracting economies in Europe. IBM previously moved away from its bread-and-butter computer hardware business, selling its ThinkPad laptop business to Chinese computer manufacturer Lenovo in 2005, and has since expanded into the higher margin businesses of consulting and software implementation.
IBM’s recent success has served as inspiration to other formerly hardware-dependent companies such as Dell Inc. and Hewlett-Packard Co., both of which have boosted their non-hardware businesses in recent years.
Even more uplifting for analysts were IBM’s latest projections for the full year. The company raised its guidance to $15.10 per share, which is $0.10 higher than its prior forecast in April. Shares of IBM were 3.8 percent higher Thursday.
Elsewhere in the technology sector, telecommunications equipment maker Qualcomm predicted higher sales in the upcoming quarter, sending its shares 4.3 percent higher Thursday. However, the San Diego-based company cut its forecast for the current quarter on weaker demand for its semiconductors.
In addition, eBay Inc. also beat analyst expectations, with revenues of $3.4 billion in the fiscal second quarter, which is 23 percent higher than the same period last year. Net income came in at $0.53 per share, or $692 million, also 22 percent higher than last year. EBay was boosted by its PayPal online payment system as well as U.S. revenues.
Google Inc. announced earnings after market close, and for the most part, the Internet giant met expectations on both revenues and profits. Google’s report is its first after the integration of Motorola Mobility Inc., a lower margin handset hardware business.
Looking past that, Google’s main Internet revenues came in at $8.4 billion for the quarter, which is 21 percent higher than the same period in 2011. Shares of Google gained 2.1 percent Thursday, and the positive earnings result lifted its shares further in after-hours trading.
Troubling Economic Signs
The U.S. Department of Labor said on Thursday that last week’s initial jobless claims rose by 34,000 to a seasonally adjusted 386,000. Those figures were slightly higher than expectations from economists.
Those figures and an official unemployment rate of above 8 percent in the United States underscore the speed (or lack thereof) of the economic recovery.
The National Association of Realtors (NAR) reported that June’s existing home sales fell 5.4 percent. Those figures are higher than the same month in 2011, but are nevertheless low. The good news is that average prices for homes are on the rise as inventories shrink in major attractive markets nationwide.
Investors are likely to put the brakes on the bullish sentiments in the coming days as positive earnings are aligned with more downcast economic expansion. While corporate earnings have largely been positive, more often than not they are a result of cost cutting instead of organic growth or comparative sales gains.
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