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Europe Resolution Boosts Investor Confidence

27 October 2011 - News - Editor

Tuesday saw a sharp drop in US stocks ahead of the EU summit to be held the following day. By Wednesday afternoon investors began gaining confidence that European authorities would agree upon a workable solution to Eurozone woes. Following an uneasy day on Wall Street, all major indexes ended the trading day higher with the S&P 500 moving up 13 points, the Dow Jones industrial average adding 162 points, and the Nasdaq composite climbing 12 points, being 1 percent, 1.4 percent and 0.5 percent respectively. Although details of the plan to bring Europe's debt crisis under control, and to assist its banking sector, still need clarification and fleshing out, the very fact that an agreement has been reached on how to move forward was enough to boost investor confidence to a degree.

Arguably the most disappointing event for investors on Wednesday was the third quarter earnings report from Amazon. Having failed to reach Wall Street estimates for third-quarter earnings by a substantial margin, Amazon's shares fell 17 percent in Tuesday's after-hours trading. Compared to the same period last year, the company's $63 million in earnings for third quarter of 2011 represented a drop of 73 percent. Its per-share earnings of 14 cents fell far short of the analyst forecast of 24 cents per share. Third quarter sales of $10.9 billion were more in line with estimates, and chief financial officer of Amazon, Tom Szkutak noted that the drop in earnings was due to the company's investment in expansion, including plans to open seventeen new warehouses and increasing digital interests.

Other tech stocks that experienced sell-offs on Wednesday included Microsoft and Cisco, both impacting negatively on the Dow. Boeing provided a much-needed dose of positivity for the Dow by reporting better-than-expected earnings and boosting investor confidence with the successful completion of the 787 Dreamliner's first commercial flight.

Research in Motion, maker of BlackBerry, changed the release date of the new PlayBook tablet operation system to February 2012, resulting in a drop in share prices on Wednesday. Reported earnings from 3M were a disappointment for investors, and while Ford reported its ninth straight profitable quarter, investors were disappointed that the automaker made no mention of dividend payments.

 


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