Market Review: Downbeat Earnings Forecast Drags Down Market
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April 25, 2008
US
The US market was in stark contrast to last week’s bullish earnings reports. The market declined this week, dragged down by downbeat earnings forecasts.
In the technology area, Apple announced that profit was up 36% in the 2nd quarter but that wasn’t enough to stem selling after hours on Wednesday. The stock was sold down on the expectation of a subdued 3rd quarter result.
Bank of America’s profit dropped 77% to $1.2B. There were $6B of provision expenses due to rising costs in the home equity, small business and home builder portfolios.
Ambac came in with a 1st quarter loss of $1.66B which saw its stock drop 43% on Wednesday.
Asia Pacific
Inflation numbers in Australia were higher than expected. The consumer price index for the 1st quarter rose 1.2% to see core inflation at 4.2%. This is outside of the 2-3% band that the Reserve Bank of Australia aims for. Despite the rise, the market believes that interest rates will remain unchanged in May due to signs of a slowing domestic economy.
UK
More signs of weakness in the Eurozone economy are beginning to reveal themselves. Even though service sector PMI improved in the month of April, manufacturing sector PMI deteriorated.
End Note
This week, all eyes will be on the US FOMC meeting on interest rates. The Fed fund futures are pricing in an 82% chance of a 25 basis point cut in the US. Also important is the ISM manufacturing index which will be watched as a gauge of the US economy.
Happy Investing!
Julia Lee
Head of Fundamental Analysis
HUBB Financial Group
Trading Tutors Team
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