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Friday, 21 October 2011 | 21:00

DJ30 PointChange: +267.09 Level: 11808.87 NASDAQ PointChange: +38.84 Level: 2637.46 SP500 PointChange: +22.84 Level: 1238.23 NASDAQ-Adv:1950 Dec: 561 NYSE-Adv:2627 Dec: 434

[BRIEFING.COM] After another volatile week, stocks are closing the week out with a strong +1.9% gain, bringing the S&P 500 +1% vs. last Friday's close. Although earnings season picked up this week, the market remains preoccupied with Europe and the steady stream of back-and-forth headlines from various "officials" that flow out of the region. While a definitive plan remains to be seen, market participants seem to be giving policymakers the benefit of the doubt that they are making progress towards one. This weekend brings the first of two upcoming EU summits, although EU leaders have managed to lower expectations for this meeting and a plan is not expected until the follow-up summit midweek next week.

This week's swings have been heavily influenced by Europe. The markets sold off Monday and early on Tuesday, with weak Chinese data and a Goldman (GS) earnings miss weighing. However, late Tuesday stocks rallied on reports that Germany and France were looking to increase the size of the EFSF. Wednesday was less eventful, and then yesterday stocks saw another late-day rally. That strength is continuing today after reports indicated that Germany and France are on the same page with regard to a European bailout plan.

Outside of Europe, earnings remained the next most important topic of interest during the week. Overall the Q3 earnings season has gotten off to a decent start, with about 70% of companies beating EPS estimates. However, the stock reactions to the reports have been more mixed. It is reasonable to expect the percentage of companies beating expectations to decline somewhat as we progress through earnings season, as the size of companies reporting tends to decline.

Some earnings highlights from the week include the following:

Monday afternoon IBM (IBM) beat and raised EPS expectations but also reported a slight miss on the top line. The stock fell 4% on Tuesday and is down 3.5% on the week vs. a 1.2% gain in the S&P 500. Apple (AAPL) surprised the Street on Tuesday afternoon when it missed Q3 EPS estimates and issued an upside Q4 outlook. The company usually blows out estimates and gives very conservative guidance. iPhone 4 sales came up short as consumers held off for the iPhones 4S, released late last week.

Looking at the financials, Monday was a tale of two banks. Citi (C) reported a solid quarter which sent the stock 7% higher, while Wells Fargo (WFC) missed and fell 8%. On Tuesday morning, BofA (BAC) reported a noisy quarter while Goldman Sachs (GS) missed expectations and reported its second ever quarterly loss as a public company. Ironically, both stocks rallied and the financial sector led the broader market higher that day with a 4.8% gain. In general, forward estimates have come down for the money center banks, but seasonal loan growth and continued favorable loss trends have allayed some fears.

Industrial companies have further eased fears that we are on the verge of a recession. W. W. Grainger (GWW), Parker Hannifin (PH), CSX (CSX), Union Pacific (UNP) and this morning Honeywell (HON) all provided relatively upbeat outlooks.

There are hundreds of earnings reports due out next week, including results from Caterpillar (CAT), Netflix (NFLX), Amgen (AMGN), United Steel (X), UBS (UBS), F5 Networks (FFIV), Rightnow Technologies (RNOW), Broadcom (BRCM), Novellus (NVLS), Aflac (AFL), Akamai (AKAM), Triquint Semi (TQNT), Visa (V), Moody's (MCO) and Potash Corp (POT), among others. Please view our earnings calendar for a full schedule of dates/times and related expectations.

Source: Briefing

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