Stocks closed lower to end a trading week that was packed with earnings reports. The Dow was off 76 on light trade at 25,451. For the week the Dow was up 1.5% or roughly 353 points. Both IBD and BTS indicate that underlying fundamentals are good and that markets have a green light. The cash flow yield spread continues to tighten which also indicates strong fundamentals.
Earnings reports are coming fast and furious. Intel had a bad earnings report. It only increased revenue by 15% and net income by 44%. While both top and bottom line results beat estimates, the stock was downgraded because of the delayed release of a new 10nm chip which the gurus said will be a big advantage for competitors. Twitter also fell after the company missed its MAU or “muntly active user” estimate. Even with that bit of bad news the company still managed to post a paltry revenue gain of 24% and a measly increase in net income of 113%. Online travel company Expedia also posted strong earnings sending shares higher. A 20% revenue gain and a 51% profit gain were better than expected. Gross bookings were up 13% and in the HomeAway division the company saw a 33% increase in bookings.
Amazon reported much higher profits than expected and shares got a positive boost with a 39% increase in revenue and a 10-fold increase in bottom line profits. Revenue figures were slightly below expectations, but the profit number was twice what the analysts had called for.
In economic news, the initial estimate for Q2 GDP growth was released today and the figure was 4.1%. This is the best we have seen in 4 years, but it was not as good as some gurus had hoped for. Early estimates for GDP growth were ranging from 4.5% to 5% but heading into the report the consensus was calling for a growth rate of 4.2%. The strong reading increases the odds that the Federal Reserve will raise interest rates two more times this year most likely in September and December. Consumer sentiment also increased from 97.1 to 97.8.