Earnings reports are trumping bad economic and political news and driving the S&P on the road to recovery after a miserable selloff. Bobbi Rebell reports.
Earnings reports are trumping bad economic and political news, and driving the S&P 500 on the road to recovery, after a miserable and stunning selloff. Stellar reports from Apple and Texas Instruments are contributing to the upward momentum in all indexes. So far 67 percent of the S&P companies that have reported earnings have come in better than analyst expectations; only 24 percent below forecasts. Thomson Reuters senior research analyst Greg Harrison: SOUNDBITE: GREG HARRISON, SENIOR RESEARCH ANALYST, THOMSON REUTERS (ENGLISH) SAYING: "Well, I think the rebound in the stock market is in large part due to the improved earnings that we've seen so far. The fundamentals look strong. Revenue is strong, and expectations for future quarters are strong. So that makes valuations look a lot more reasonable." It's no surprise names like Apple are helping. Technology has been a big winner so far with 72 percent above forecasts. Financials are also reporting solid results. Almost half of those, which include names like Bank of America and Goldman Sachs, reporting better-than-expected results. Other scoreboard highlights: consumer discretionary, consumer staples and energy. And industrials have been huge - 94 percent beating forecasts. The key trend is right at the top line. Revenues are finally gaining momentum - meaning the earnings are - because the companies are bringing in more cash, not just slashing costs: SOUNDBITE: GREG HARRISON, SENIOR RESEARCH ANALYST, THOMSON REUTERS (ENGLISH) SAYING: "We have stornger top line growth this quarter, almost 4 percent revenue growth. Its been closer to one percent or zero percent over the last year or so. So we are starting to see a better top line numbers, and that has really driven the earnings numbers, and made them appear to be at least more based on organic growth, as opposed to the cost cutting measures we've seen in the past." Harrison says companies are also optimistic about the current quarter and beyond - giving the markets more fuel to power forward.