US Equities Rose on GDP Growth, Unchanged Interest Rates



US equities rose

The US market (SPY) rose by 1.16% during the week ending July 31, 2015. The rise was mainly due to the US economy’s GDP (gross domestic product) growth of 2.30% and a rise in orders for key US durable goods.

The US economy grew at an annualized pace of 2.30% in the second quarter. It missed the median economist forecast of 2.60%. It also reported a revision in the first quarter GDP to 0.60% growth from the 0.20% contraction reported previously. Growth in the housing and consumer sectors led to an overall rise in economic activity. The Fed’s July meeting ended with no policy action. Although the Fed has provided a few hints about its plans to raise interest rates, an initial hike is widely expected in 4Q15.

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Earnings announcements

In 2Q15 earnings announcements, ExxonMobil (XOM) reported a 50% fall in its earnings. This was the worst quarterly performance in six years. It was mainly due to sharply lower oil prices, despite steady cost cutting. Chevron’s (CVX) profit also fell by 90% as low oil prices erased earnings. International oil giants British Petroleum and Royal Dutch Shell also reported a fall in the profits.

On the technology front, Facebook (FB) reported a 9% fall in its profits, but its revenue rose 39%. Its subscriber base grew 13% to 1.49 billion people.

The stock market performance is a key driver of asset managers’ revenue. Performance flows directly to earnings and share prices. Major asset managers like BlackRock (BLK), State Street (STT), Franklin Resources (BEN), T. Rowe Price (TROW), Morgan Stanley (MS), and Berkshire Hathaway (BRK-B) are affected by US equities’ performance.

US equities rose along with European (EFA) equities, but emerging market equities (EEM) fell during the week ending July 31, 2015.


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