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The stability of Wall Street near the highs will depend on profits

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The stability of Wall Street near the highs will depend on profits

The stability of Wall Street near the highs will depend on profits
July 18
12:30 2016

United States securities market finally has broken all its own annual records, and it is going to be inspected again next week. By this time the released reports of the companies will help the investors to form a complete picture of the effects of UK citizens’ decisions on the exit from the European Union membership.

Earlier the investors made predictions about the imminent appearance of signs that profits would recover in the second half of the year. But the US companies are behaving more cautiously because of the concern about the weakness of the global economy. Also, they are careful due to the beginning of the strengthening of the  US dollar after a referendum in the United Kingdom on 23 June.

The players for the increase cherish the hope for the strengthening of the profit. This can potentially trigger the further increase of the shares this year. Or, at least, it will help to keep the already gained advantage. The Rally, which recently helped the S&P 500 exceed the high of the last year May, had a positive impact on the growth of the index by 5.8 percent since the beginning of this year.

The reports publication from a number of leading industrial and export companies is expected this week. For example, there will be publications of such companies as International Business Machines, Schlumberger, Johnson Controls, Johnson&Johnson and other ones, which sales have stronger dependence on Europe, according to “Reuters” agency.

The uncertain situation, regarding the consequences of Brexit, can form new factors that will restrain the US exports of industrial products. Also, the strengthening of the US dollar and the likely slowdown of the demand in Europe will be taken into account, said Eric Gershwind from MSC Industrial Direct Co.

Hugh Johnson, a chief investment officer of Hugh Johnson Advisors LLC in Albany, said that he did not feel optimism about the profits recovery in the third and fourth quarters. In the third quarter the corporate profit forecasts become negative. For this reason the recession, which began in the third quarter of the last year, can be continued.

According to forecasts, the earnings of the second quarter of 2016 have decreased by 4.7 percent in annual terms. But the third quarter is expected to have a slight increase within 1.5 percent if to compare with the 2.4 percent of the increase that was expected before Brexit, according to the “Reuters” information. The quarterly results reports also will be provided by General Electric, eBay, Yahoo, Intel and Honeywell International. In general, this week is expected the reports from 91 companies of the S & P 500 index. At this time, the securities of Europe grew on Monday due to the increase of ARM securities. This happened against the background of the fact that SoftBank had signed a contract to buy a chip maker for $32 billion.

By the beginning of the day the pan-European STOXX Europe 600 and the FTSEurofirst 300 indexes had increased by 0.6 and 0.7 percent respectively. The shares of ARM went up 45 percent to the unprecedented maximum of 17.33 pounds thanks to the information that SoftBank is going to buy the British company-developer of microprocessors for 24.3 billion pounds ($32.2 billion). SoftBank paid 17 pounds for each ARM paper within the transaction. The Japanese company issued a statement that the ARM staff in the United Kingdom will be doubled and the company’s headquarter in Cambridge will be saved. The shares of other companies in the sector – Dialog Semiconductor, AMS and STMicro have jumped by 4.1, 3.8 and 1.1 percent respectively.

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  1. Mark Polo
    Mark Polo July 18, 16:22

    Due to Brexit, London, as a financial center, will be weakened. This will benefit New York as a financial center. As a result, this will weaken Europe as a whole, and consequently, the United States will benefit from this, too.

    Reply to this comment
  2. Margo
    Margo July 18, 19:08

    Brexit has provoked increased volatility in global financial markets and, probably, the Bank of England may soon cut interest rates to support the economy

    Reply to this comment

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