How much higher, and how quickly, can Wall Street rise? It’s a question this column has asked a couple of times, but it’s one that bears repeating after the Dow Jones hit a new record close on Friday.
Might we see the Dow break 27,000? Market sentiment suggests yes. Moreover, it suggests it could do so this week.
Friday saw disappointing US fourth quarter GDP figures, but the Dow still jumped 224 points thanks to stronger than expected earnings figures from AbbVie, Honeywell, Intel and Rockwell.
More potentially market-moving corporate results are due to come this week, with Google’s parent company Alphabet, as well as McDonald’s, Pfizer, Boeing, Eli Lily, Facebook, Amazon and Time Warner all reporting quarterly earnings.
Even a modest rise over the next few days could see the Dow, Nasdaq and S&P 500 poised to break yet more records by Thursday or Friday when the biggest beast of all, Apple, reports its quarterly earnings.
Analysts are already salivating over the prospect of strong earnings from the tech giant.
The world’s biggest company - by market value - is expected to report its strongest ever quarter.
Forecasting Apple's earnings
Analysts are forecasting Apple’s fourth quarter of net earnings to beat its record $18 billion net earnings from 2015.
Apple is estimated to have sold perhaps as many a 29 million iPhone Xs and another 81 million iPhones in the quarter globally. Revenue is forecast to have risen 11 per cent to about $86 billion.
Given the Dow closed at 26,616 on Friday 27, 000 by this Friday seems very much in reach.
Meanwhile, the S&P 500 could easily breach 3,000, given it closed at an all-time high of 2,872 on Friday.
And what of the Nasdaq, which saw its best day since 2nd January? Could it hit 8,000? Given that Facebook, Alphabet, Amazon and Apple are all expected to post positive earnings this week, surely the answer must be yes.
If the Dow does jump 2,000 points in a month, perhaps we should ask ourselves again whether this is a case of over-exuberance, or even hubris, in the markets. There remains a danger that markets get carried away. That stock prices become, if they are not already, over-valued.
But there is another explanation. For years market commentators pointed out there was actually a lot of cash floating around the world but that confidence in the wake of the financial crisis was so low that investors didn’t trust the equities markets.
The implication being that when confidence returned, so would that cash. Perhaps this is exactly what is happening.
One thing seems certain though. If the Dow does hit 27,000 later this week, 30,000 will become the new target. And with the White House’s tax reforms still to come, you would probably struggle to find someone to bet against that happening later this year.
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