Uncertain Economic Outlook Depresses Market

With second quarter corporate results and forecasts offering up a mixed bag of optimism and pessimism, (or realism depending on who you talk to), the mid-week market reflected investor disappointment at Federal Reserve Chairman Ben Bernanke’s warning that the US economic outlook remains uncertain. Actually, his words were “unusually uncertain” which is seen by many as an indication that this has come as somewhat of a surprise even to the Fed. However, Bernanke offered reassurance that tightening up of policies will prevent the US economy from falling into recession again, and while maybe not at the pace hoped for, the economy is nevertheless strengthening. The tightening up of policies alluded to, include the Wall Street reform bill signed by President Barack Obama on Wednesday, which is being described as the most stringent set of financial rules and regulations since the Great Depression of 1929.

While Tuesday and early Wednesday saw investors responding positively to market activity, Bernanke’s remarks saw an immediate about-turn, ending the day with all major indexes down by more than one percent. In comparison with the same period last year, Morgan Stanley achieved above the expectation of Wall Street, reporting a quarterly net profit of $1.4 billion as opposed to the $138 million loss of 2009. Net revenue for the financial giant was up 53 percent from 2009 at $7.95 billion. Also in the financial sector, Wells Fargo reported a drop in net profit from $3.2 billion in the second quarter of 2009, to $3.1 billion in this past quarter, which is still above what was expected. Wells Fargo CFO Howard Atkins expressed the firm’s confidence that the positive trend will continue through the rest of the year.

Other major publicly listed companies to beat forecasts include Freeport-McMoRan Copper & Gold and Coca-Cola. In addition to Morgan Stanley, notable Standard & Poor’s 500 components to report increases include Textron, Goodyear and Eaton Corp, with decreases being reported by Yahoo, Tenet Healthcare, Stryker and SLM. In addition to Coca-Cola, Dow components reporting increases include AT&T, 3M and Caterpillar, with decreases being declared by Johnson & Johnson, Bank of America, JP Morgan Chase and Hewlett Packard.