“We just bought ourselves a little more time, and the market seems to like that,” she said. “But we’re likely to go through the same cycle again in three months.”
Another concern is earnings. Despite good reports from a few big companies Friday, the third-quarter reporting season has just started and most companies aren’t expected to post blowout results.
Earnings for S&P 500 companies are expected to have grown 3.4 percent from a year earlier, the smallest quarterly increase in a year, according to S&P Capital IQ. At the start of 2013, third-quarter earnings were expected to grow at nearly triple that pace.
What’s driven stock prices up this year hasn’t been earnings as much as investors’ willingness to value them more. At the start of the year, stock buyers were paying $14 for every $1 of S&P 500 earnings, according to S&P Capital IQ. Now, they are paying more than $16.
Investors will have a better idea of the U.S. corporate profit picture next week when several big companies report results, including McDonalds on Monday and Boeing and Caterpillar on Wednesday and Ford on Thursday.
Google jumped $122.61 to $1,011.41 Friday. It reported a 36 percent jump in earnings after the stock market closed Thursday. An erosion in Google’s ad pricing was more than offset by a big increase in the frequency of clicks on Google’s ads.
General Electric rose 87 cents, or 3.5 percent, to $25.55, after topping analysts’ expectations for net income, excluding charges for shedding its media and banking operations. Stock of GE, which makes jet engines and other industrial products, is the highest it’s been since the start of the financial crisis in September 2008, when some investors doubted the company could survive intact.
Morgan Stanley rose 76 cents, to $29.69, a gain of 2.6 percent. The investment bank reported that its earnings nearly doubled on strong results in stock sales and trading, beating analysts’ estimates. Morgan Stanley is up 55 percent this year, the most among major banks and nearly twice the gain of the next-best performing bank stock, Citigroup.