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Foolish Preview: Market to jump as Dow and ASX futures close higher

Buoyed by a strong rise in consumer and technology stocks, the Dow Jones Industrial Average (Index: ^DJI) rose today on stronger-than-expected consumer spending.

The US market had risen every day last week, and that positive sentiment carried the day for a full-week gain of 1.53%. Friday’s rise was somewhat of a surprise, though, given that the US Commerce Department reported just a 2.2% annual GDP growth rate for the first quarter, down from 3% last quarter. Economists had been expecting 2.7%, but GDP was ultimately held back by a drop in business spending. That stronger-than-expected consumer growth made up for some, but not all, of the decline.

The news of strong consumer spending, coupled with better-than-expected earnings from consumer stocks Amazon.com and Expedia, helped drive the market higher. Among the Dow stocks, MerckChevron, and Procter & Gamble all reported earnings.

In Australia, the ASX SPI futures index is pointing to strong gains on our market this morning, having added 28 points, or 0.64%.

Of course, both the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and All Ordinaries (Index: ^AORD) (ASX: XAO) indices do tend to have minds of their own, and given last week’s poor showing compared to the strong US results, investors shouldn’t take anything for granted!

In company news, the National Australia Bank (ASX: NAB) has already released earnings this morning, with a ‘cash profit’ of $2.82b for the first half of its financial year– up 5.7% on the prior year. The NAB also outlined plans to restructure its UK business, which will see branch and back office closures as well as staff cuts.

The reasonably small earnings increase won’t be a surprise for regular readers — we’ve been cautioning that bank earnings growth is likely to be much less than in the ‘go-go’ years of the last couple of decades.

The Fairfax press is this morning quoting Bell Potter Securities analyst TS Lim as saying the earnings were “better than expected”. That might translate into some good news for the rest of the sector, and investors will be closely watching Commonwealth Bank (ASX: CBA), ANZ (ASX: ANZ) and Westpac (ASX: WBC) today.

In other news, Wesfarmers (ASX: WES) boss Richard Goyder yesterday called for a 50 basis point (0.5 percentage point to you and me) cut in the official cash rate on ABC’s Inside Business. A retailer calling for a cut in interest rates… where have we heard that before?

As well as the NAB results, Origin Energy (ASX: ORG), Lynas (ASX: LYC) and Aquarius Platinum (ASX: AQP) release results today.

We’re off for another week Fools, but as always, keep your eye on the prize, and don’t be distracted by the ‘noise’. The spoils go to the investors who can avoid knee jerk reactions, and can separate the facts that matter from the noise that doesn’t.

The ASX is already on the move in 2012, and Goldman Sachs experts recently said they reckon S&P/ASX 200 could top 5,000 next year. Read This Before The Coming Market Rally is a must-read for investors who don’t want to miss out on the party. Click here now to request your free copy, before it’s too late

Scott Phillips is an investment analyst with The Motley Fool. Scott owns shares in Amazon.com. You can follow him on Twitter @TMFGilla

Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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