By Joyce Yu
Philadelphia, PA–Wall Street opened slightly higher on Monday as investors were encouraged by solid company earnings.
Traders said investors who have driven Wall Street to further record highs this year, were yet to show clear signs of turning more negative, according to a Reuter’s report.
“The market still wants to be optimistic, it wants to continue to move higher from here,” said Robert Pavlik, chief market strategist at Boston Private Wealth, “It seems to be the trend recently that companies report good earnings and the market sells them off a little bit, taking it as an opportunity to lock in profits. But it’s not something that should worry long term investors.”
With a solid initial round of third quarter corporate earnings by banks last week, US conglomerates General Electrics and Procter & Gamble are set to report this week. Both companies are facing tensions from activist shareholder, Trian Partners, due to poor earnings and stocks performances.
Investors aren’t expecting pretty numbers from Procter & Gamble which are due on Friday morning, with sales projected to rise barely 1%. P&G’s sluggish results underscore why Peltz wanted to shake things up by trimming the number of business units at the company and launching new products to attract younger customers, according to a CNN report.
General Electric had experienced a management shakeup which included the retirement of longtime CEO Jeff Immelt and exit of Jeffrey Bornstein, the chief financial officer. Trian’s co-founder Ed Garden has been offered a seat on the board.
GE shares tumbled to a four-year low last week, leaving them down 27% in 2017. Its free cash flow, a key metric of financial healthy, has declined for six straight years. GE’s new CEO John Flannery who will share about his vision for stabilizing the company on Friday morning, has pledged to cut costs, but that may not be enough to turnaround the company.
GE is “increasingly likely” to cut its coveted dividend, JPMorgan analyst C. Stephen Tusa Jr. warned last week in a report. Given Trian’s history of pushing conglomerates to shrink themselves, Tusa said there’s a growing chance of a “comprehensive breakup” of GE.
Bolstered by strong retail data released, Wall Street indexes ended higher on Friday, with the S&P recording gains for the fifth straight week.
However, September consumer prices came in below expectations and this prompted concerns over Fed’s plan for another rate hike within this year. Federal Reserve Chair Janet Yellen said on Sunday that the U.S economy remains strong and the strength of the labor market calls for continued gradual increases in interest rates despite subdued inflation. The dollar strengthened as a result.
