Although many see it more as a psychological breakthrough for investors rather than a technical achievement, the fact that the Dow rose above the 10,000 point mark for the first time since October 3 last year had a buoyant ripple effect on stock markets in countries other than the United States, with Japan’s benchmark Nikkei jumping by 1.8 percent. The advance on Wall Street was led by positive results from JP Morgan Chase, but was broad based with a total of 25 of the 30 Dow components increasing. These included Fortune 500 companies Caterpillar, Chevron, IBM, Hewlett Packard, United Technologies and Exxon Mobil.
While stock market investors are no doubt encouraged by Wednesday’s upbeat performance on Wall Street, there was cause for caution as a dismal retail sales report released on the same day indicated that the road to economic recovery would continue to be bumpy. Third quarter earnings will need to exceed expectations, while fourth quarter forecasts will need to reflect a good measure of optimism before the majority of stock market investors would be ready to jump back into the market with any degree of enthusiasm. Since hitting twelve-year lows in March of this year, the Dow has recovered by 53 percent, with the S&P 500 gaining more than 60 percent, indicating that stocks have been moving ahead, overcoming the dips that have affected them from time to time.
With JP Morgan Chase being the first major player in the banking sector to report its results for the third quarter, the banking giant posted a net income of $3.6 billion and 82 centers per share, being way above the 52 cents per share that was anticipated by Wall Street, and a far cry from the scenario this time last year, when panic reigned supreme following the collapse of Lehman Brothers. Credit card and mortgage default levels continue to increase in the retail banking division of JP Morgan Chase, however a sharp rebound on investment banking revenue has saved the day. Goldman Sachs will be next to report third quarter results on Thursday and the coming weeks will reveal if the financial sector is back on track, or if JP Morgan Chase is an isolated case of a brilliant turnaround.
