Stressed Out

Markets traded flat today in anticipation of the results of the stress tests of the EU banking system. When the news came out 7 of the 91 banks failed the tests. On the news, North American indices decidely turned positive. EU officials assert the tests were tough and confirm the resilience of the European banking system. Others would argue the tests weren't that stressful and more a political attempt to calm financial markets.

Also helping the markets are continued strong corporate earnings. Ten of thirteen S&P 500 companies reported positive earnings surprises this morning including Schlumberger, Ford, Verizon and McDonalds. As of Thursday night, 162 companies in the S&P 500 had reported 2nd quarter results, and an impressive 85% have beat average analyst expectations. According to Credit Suisse, market performance in earnings season tends to peak after the first week in strong reporting seasons over the last 6 years.

Also from Credit Suisse, there 'Executive Panel' survey points to further improvement in the trends in corporate spending, as 68% of companies asked were expecting to either maintain or increase spending in the next 6 months. Spending on information technology remains the most positive story.

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