Another set of dismal data again failed to get Wall Street down last night.
Big-named US companies that reported their second-quarter results overnight came up short of expectations and worse, some even downgraded their earnings guidance. Data out on the American housing market confirms that the sector remains in a rut.
Goldman Sachs reported that profits for the second quarter dropped by 82 per cent from a year ago. This is ugly enough by itself, but even uglier considering that this was lower than market forecasts and that GS' revenues dropped by 31 per cent from the first quarter and 36 per cent from a year ago.
Yet GS scripts closed 4.7 per cent higher from their opening level, with investors putting a positive spin on the negative news. It could only go up from here, particularly now that the civil fraud allegations against the company have been settled.
Johnson & Johnson's second quarter bottomline number was in line with estimates of US$1.21 per share. But - yes there's a but - revenues were lower than expectations and also - yes there's an also too - it slashed its full-year 2010 earnings forecasts to US$4.65-4.75 per share. Consensus was for US$4.80 per share. It didn't do a GS though; its shares rose only 0.1 per cent from the open.
Tupperware also took the scissors to its earnings projections. It now expects 2010 profits to be 17 per cent lower than its April forecast of US$3.51-3.61 per share. Scripts closed 7.4 higher from their opening.
There were also things to worry about in terms of economic data. US housing starts added to the 15 per cent drop posted in May with another 5 per cent decline in June - bigger than expectations for a 3 per cent fall. The latest data take the total number of new housing construction down to its lowest level in eight months.
But whereas not so long ago Wall Street only saw dark clouds, this time it's found a silver lining. Building permits - a leading indicator of housing construction - increased by 2.1 per cent in June.
There's a silver lining peeping out of Europe too. Ireland, Spain and Greece were able to find buyers for their debt issuances. Greece yields rose but Spain's and Ireland's fell. It seems nobody's paying attention to Moody's anymore. This is the same Ireland whose credit rating Moody's cut one notch to Aa2 only yesterday.
Overall, the macroeconomic and financial market backdrop has not changed much. We're still in a pause. There are as much good news as there are bad.
What has changed is markets' perception. They're looking at the same glass and see that it's half-filled.
