The market started the day in an optimistic tone as investors were heartened that technically the US isn’t in a recession and by better-than-expected earnings from major companies such as Procter & Gamble (PG: 66.68 -0.35 -0.52%), General Motors (GM: 22.92 -0.27 -1.16%) and Kraft (KFT: 32.00 +0.05 +0.16%). Investors are also looking forward to a Fed rate cut today.
General Motors, the US biggest car manufacturer, reported a $3.3 billion Q1 loss, which was a result of a strike at one of its major parts suppliers, the weak US market and dropping sales of its SUVs and pickups. This was a loss of $5.74 per share vs a profit of 11 cents per share for Q1 last year. Excluding one-time items, its earnings still managed to beat Wall Street’s dreary expectations and its stock rose.
Kraft, the maker of Oscar Mayer hot dogs, Oreo cookies and Maxwell House coffee reported a 13% drop in earnings to $608 million, or 40 cents per share, down from $702 million, or 43 cents per share, last Q1. However, the company reported an increase in sales and market share and says that the reason its profit declined was that it refrained from raising prices till recently despite the higher cost of food products. It also revised its revenue forecast to an increase in 5% vs the 4% it had previously forecast. So despite the lower profit, investors were optimistic and the stock moved upward.
Procter & Gamble also beat Wall Street’s expectations this time with a profit increase of 9% to $20.5 billion vs the $20.4 billion expected. It also said that it had raised prices to make up for the increasing commodity costs but that it had seen strong consumer loyalty and its sales had risen for the period. P&G also raised its full-year earnings forecast to $3.48 and $3.50 a share.
If the Fed comes through with a good rate cut, it could give the market a further boost.
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