Stock markets stabilized this week despite heavy selling that followed a Standard & Poor's warning on the U.S. credit rating. On Wednesday the Dow Jones Industrial average finished at its highest closing level in nearly three years amid strong earnings reports that have buoyed investor enthusiasm despite still-shaky economic data. Many global stock markets will be closed Friday, April 22 in observance of Good Friday.
Global economic news
S&P signals U.S. credit rating in danger
S&P lowered its outlook on U.S. government debt to "negative" from "stable." The warning came as U.S. government debt mounts; however the agency did not lower its "AAA"-rating for U.S. Treasury securities.
OECD cuts Japan's economic outlook
The Organization for Economic Cooperation and Development (OECD) said it expects Japan's economy to slow significantly this year after last month's earthquake and tsunami. The group said the slowing will come as the government is forced to cut spending on various programs to rebuild the country's battered northeast region. It said it expects gross domestic product to expand 0.8% this year, down from its previous forecast of 1.7%. The OECD added that it expects the economy will expand 2.3% in 2012, faster than its previous estimate of 1.3%, as reconstruction spending picks up.
Eurozone grows more than expected
The eurozone economy grew more than anticipated in April, according to preliminary results from the financial information firm Markit. Meanwhile inflation pressures continued to build, and consumer confidence fell to its lowest level in eight months, an indication that the high price of oil and inflation may be weighing on domestic demand. On Thursday, Germany's Ifo institute reported that German business confidence fell in April for a second month.
U.S. housing starts and existing sales increase
Strong reports from the U.S. housing sector gave investor enthusiasm a boost this week with better-than-expected news on housing starts and existing homes sales. Homebuilding rebounded 7.2% in March and existing home sales increased 3.7%. However, construction remains near historically low levels heading into the spring selling season, and the National Association of Homebuilders housing market index fell to 16 in April from 17. Readings below 50 indicate more builders are pessimistic about conditions than are optimistic.
U.S. jobless claims fall less than expected
Initial jobless claims fell less than forecast last week, indicating that the labor market is still struggling to improve. Claims decreased by 13,000 to 403,000 in the week ended April 16.
Global corporate news
IBM and Intel post strong profit reports
As has been the case in the past several quarters, first-quarter corporate earnings are on track to beat analysts' estimates. Technology giants IBM and Intel both reported strong sales and profits in the first quarter. IBM reported the highest revenue growth — 7.7% — that the company has seen in 10 years. Intel's profits rose 34%, and its revenues jumped 25%.
Apple's profit rises 95%
Apple's first-quarter profit nearly doubled, jumping 95% from the same quarter last year, amid strong sales of its iPhone. Revenue rose 83%, and the company reported that it remained largely unscathed by Japan's earthquake and the medical leave of chief executive Steve Jobs.
GE reports 77% profit increase
General Electric reported a 77% increase in its first-quarter earnings and boosted its quarterly dividend by 15 cents. The earnings increase came amid an improvement in the company's GE Capital financing arm and gains at most of its industrial units.
Financial companies report mixed results
Morgan Stanley reported better-than-expected first-quarter earnings as trading revenues more than doubled from the fourth quarter. Citigroup's profit fell 32% to $3 billion. Goldman Sachs beat earnings estimates but its shares fell on concerns the firm will have problems posting strong profits going forward.
Halliburton's profits more than double
One year after the oil rig explosion and spill in the Gulf of Mexico, Halliburton posted strong results for the first quarter as it remained largely unaffected by the last year's Deepwater Horizon disaster in the Gulf of Mexico. Halliburton was one of the several service providers on the Deepwater Horizon drilling rig and designed the failed cement seal that is believed to have allowed explosive gas to flow into the well. The company's first-quarter profit more than doubled to $511 million from $206 million a year ago.
NRG drops reactor plans
NRG said it is dropping plans to build two nuclear reactors in Texas. This is seen as the most tangible evidence to date of the ramifications in the United States from the nuclear plant accident in Japan.
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