Great Expectations: Earnings Hopes Lift US Stocks

Wall Street's earnings jitters quickly transformed into earnings enthusiasm on Monday as the Dow enjoyed its best one-day rally in six weeks after famously-bearish analyst Meredith Whitney turned bullish on banking titan Goldman Sachs.
Today's Markets
The Dow Jones Industrial Average rose 185.16 points, or 2.27%, to 8331.68, the Standard & Poor's 500 added 21.92 points, or 2.49%, to 901.05 and the Nasdaq Composite picked up 37.18 points, or 2.12%, to 1793.21.

Goldman Sachs (GS: 149.23, 7.57, 5.34%) led the triple-digit rally and a 6.4% surge from the financial sector after the bank was upgraded to "buy" from influential analyst Whitney, who predicted Goldman will beat the Street when it reports results Tuesday morning.

“What’s good for Goldman is good for the market huh? It used to be what’s good for General Motors is good for America but you can throw that out the window,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “The simple fact that Meredith Whitney turned positive on something financial is a really good sign."

The rally, which was the Dow's strongest since June 1, stood in stark contrast to the pessimism that sent the markets last week to their first four-week slide since March. In fact, Monday's gains allowed the Dow to recover all of its losses from last week. Up until Monday, the bullishness that lifted stocks from their 12-year lows this winter had vanished amid concerns about the timing and strength of an economic recovery.

“While the rally was based on the hope that the second quarter was better, now comes the reality,” Dan Greenhaus, equity analyst at Miller Tabak, told FOX Business. He said for the rally to restart, companies must provide evidence that conditions are improving, not just stabilizing.

All 30 components of the Dow closed in the green, led by financial giants Bank of America (BAC: 12.97, 1.12, 9.45%), General Electric (GE: 11.4301, 0.67, 6.23%) and JPMorgan Chase (JPM: 34.53, 2.24, 6.94%). On the other hand, Hewlett-Packard (HPQ: 37.28, 0.08, 0.22%) and McDonald's (MCD: 57.2, 0.2, 0.35%) lagged behind.

Earnings Hopes Fuel Rally
Underscoring the wave of earnings optimism lifting stocks, all 36 S&P 500 companies scheduled to report results later his week closed higher, including Citigroup (C: 2.76, 0.18, 6.98%), Intel (INTC: 16.49, 0.45, 2.81%) and Google (GOOG: 424.3, 9.9, 2.39%).
“It’s not just the earnings but it’s the guidance going forward. Everyone wants to know where we’re going to be and how these companies are going to survive the next three months. That’s very, very important,” NYSE trader Jonathan Corpina of Meridian Equity Partners.


But Goldman Sachs garnered the most attention as the former investment bank is expected to report stellar results Tuesday amid soaring trading profits. Expectations for Goldman are high as 14 industry analysts have raised their estimates on the bank and its shares have gained 68% year-to-date and 5% on Monday.
Shares of Goldman and other financials like Huntington Bancshares (HBAN: 4.13, 0.26, 6.72%) and Wells Fargo (WFC: 24.67, 1.76, 7.68%) rallied around bullish comments from Whitney, who predicted Goldman will beat the Street and upgraded the bank to “buy” from “neutral,” citing a “tsunami of debt issuance" and decreased competition.
Global Markets
European stocks closed higher for the second time in the last three sessions. London’s FTSE 100 jumped 1.82% to 4202.13, France's CAC 40 rose 2.31% to 3052.08 and Germany's DAX climbed 3.19% to 4722.34.
Asia was broadly lower overnight. Japan's Nikkei 225 dropped 2.55% to 9050.33, Hong Kong's Hang Seng fell 2.56% to 17254.63 and China's Shanghai Composite tumbled 1.07% to 3080.56.