Investors are trying to get a read on the economy using earnings reports. They're finding it's not so easy. The result yesterday was yet another erratic day of stock trading.
The Dow Jones industrial average rose 75 points after having fallen 140 in early trading in response to a series of disappointing revenue reports. Analysts were hard pressed to come up with a reason for the turnaround. But trading was extremely light, and that tends to skew stock prices.
Analysts said some investors were getting a little more upbeat as they awaited earnings reports from Yahoo Inc. and Apple Inc. after the close. But those reports came in mixed, just like those from the many companies that have also reported second-quarter results. Apple's stock surged in after-hours trading, but Yahoo fell. Like IBM Corp., Johnson & Johnson and Goldman Sachs Inc., its revenue fell short of expectations.
Investors have been focusing on revenue rather than bottom-line earnings because of the link between companies' sales and the economy. If revenue is down because consumers aren't spending, that's a sign that the economy could remain weak.
Investors seem to have decided as yesterday wore on that earnings didn't look quite as bad as they first thought. Analysts noted that Goldman's drop in revenue - an 83 percent drop to $453 million - was similar to those reported by JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. Their revenue fell not because of a weak economy, but because their customers decided to avoid the financial markets' turbulence during the spring.
The Dow rose 75.53, or 0.7 percent, to 10,229.96. The broader Standard & Poor's 500 index rose 12.23, or 1.1 percent, to 1,083.48 and the Nasdaq composite index rose 24.26, or 1.1 percent, to 2,222.49. - AP