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New York Stock Exchange - Source: Reuters
It never ceases to amaze me just how quick sentiment can change on markets.
Just a week or so ago stocks were floundering and at risk of giving up much of the hard earned gains made since March.
However, after a strong run of better than expected quarterly results from leading US companies stocks have now surged back to levels not seen since January, with the NASDAQ racking up 12 days in the black, its best winning streak in over a decade.
Goldman Sachs, IBM, 3M, Ford, Apple, Starbucks, Caterpillar are just a few of the household names to perform well.
So why have they suddenly done better than expected? One could hardly say the last quarter has been a good one.
Well, there are a couple of things at play.
Firstly analysts say many of the results are a reflection of aggressive cost cutting measures and assets sales.
This is particularly so for the likes of Ford which has been through a massive restructuring over the last few months, while Caterpillar alone has reportedly cut 17,000 full-time jobs since December.
So, it's not actually revenue pushing up results.
Expectations are also key here.
One broker I spoke to stressed to me prior to reporting season that most results would 'beat the street'.
The reason for that he insisted was that analysts have been beaten down by bad economic data this year and have been too timid in their forecasting.
In other words, they are wary that in this environment it would be far worse to over cook a result than underplay it. Better to play it safe.
What can we expect in New Zealand for the upcoming results season?
The early signs from the likes of Sky City and Delegat's this week were encouraging with both coming through with earnings upgrades.
Casino operator Sky City forecast that it would beat 2009 net profit expectations by $17 million. Now this was perhaps the most significant as it has exposure to tourism and some retail trading.
However, two profit upgrades does not a successful reporting season make. As Brian Gaynor warned this week it is likely to be a mixed bag.
Once again, like earlier this year, debt levels will be closely watched. Hanging over both the US and New Zealand reporting season remains the concern about unemployment, with economies still shedding jobs.
The unemployment rate in the US, according to Fed chair Ben Bernanke, is not likely to peak until late this year. Presumably well over 10%.
New Zealand too is likely to see unemployment keep rising until well into next year. This will keep confidence amongst consumers muted for some time.
So, consumer driven growth seems unlikely for some time yet. In fact, Ben Bernanke again stressed this week that the world should not look to the US consumer to get it out of trouble.
Asia, he said, would need to pick up some of the slack.
However, some like Paul Webber at OM Financial feel that high unemployment won't necessarily hold back some firms from making profits.
He says if firms streamlined early on in the recession they will be in good shape for the long term.
