U.S. Equity Markets Shrug Off Negative Economic News in Favor of Positive Earnings

Equity markets in the United States have shown remarkable resilience in the wake of recent economic events, as U.S. leaders square off over the deficit and the European Union continues to grapple with the onslaught of sovereign debt issues. While the media continues to spotlight the slow progress of political leaders on both sides of the pond, the U.S. stock market has not slowed down. Indeed, the Dow Jones Industrial Average is approaching multi-year highs hit in May. The reason, at least temporarily, appears to be earnings. Although some companies continue to struggle amid an uneven economic recovery, many companies have reaped the rewards of a consumer upswing. Look to Apple AAPL as an example. In its most recent quarter ended June 25th, the company posted quarterly revenue of $28.57 billion and record quarterly net profit of $7.31 billion, or $7.79 per diluted share. Apple sold more than 20 million iPhones and 9 million iPads during the period, both year-over-year growth increases of over 100%. Google GOOG and General Electric GE have also posted strong results this quarter. When big companies post headline earnings, a collective buying frenzy can often occur - whether its warranted or not. Furthermore, if large companies like the aforementioned continue to grow profits, then capital investment increases, as well as shareholder wealth. Equity markets appear to be watching where the money is. When push comes to shove, most market watchers believe that U.S. regulators will reach a deal before the August 2 deadline. In a similar light, most market watchers believe the EU will do whatever necessary to secure the strength of the Euro, including another bailout of Greece. Until a significant market event occurs to show otherwise, it appears that strong earnings will temporarily prevail over politicking.