US earnings lift gloom

Investors on Wall Street are still nervous

A raft of corporate earnings reports have sounded a welcome note of optimism on Wall Street, with many coming in higher than expected.

While investor confidence continues to be dogged by fears over a possible war with Iraq, dealers said the results were evidence that some shares had been punished too severely.

"We were way oversold and due for a bounce," said Peter Boockvar, a strategist at Miller Tabak & Co.

However, analysts said until a clear decision was reached on Iraq, investor limbo would continue.

Drugs of choice

"The market is still in this terrible unknown," said Sadakichi Robbins at Bank Julius Baer.

Leading the gainers on Tuesday were office equipment maker Xerox and drugmaker Merck.

Xerox enjoyed a 17% rise in share value after reporting a profit of 1 cent per share in the final three months of 2002, after years of losses.

Merck also sounded an upbeat note.

Its end of year earnings were up 2% thanks to strong sales of its popular drugs, including the cholesterol drug Zocor and Fosamax, a treatment for osteoporosis.

Rival drugmaker Wyeth was also in a positive mood after reporting that its earnings in the three month period nearly doubled.

The group said this was thanks to its decision to offload a stake in Amgen, and to healthy sales of its drugs for depression, ulcers and hemophilia.

Consumer boost

The consumer goods giant Procter & Gamble, whose brands include Pringles crisps and Pampers nappies, also provided further evidence that consumers continued to spend in 2002.

Its earnings in the final three months were up 14%, higher than analysts had anticipated thanks to price cuts and its ability to stand up to fierce competition.

The company lowered the price of its nappies to fight off rival Huggies, and also pushed its Crest tooth-whitening products to defend itself against the cheaper offering from Colgate-Palmolive.

"P&G has been getting a bit more aggressive on the pricing front, " said Joseph Altobello, an analyst at CIBC World Markets.

Meanwhile Kraft Foods, the largest North American food company, predicted sales in 2003 would beat forecasts.

However, it warned that the ongoing crisis in Latin America, where the value of several currencies have been severely devealued, would hit profits.

Heading lower

A less rosey picture was painted by the electronics manufacturer Celestica and SBC Communications, the second largest telephone company in the US.

SBC warned that revenues would continue to decline in 2003 for the third consecutive year, as it continues to lose customers to rivals.

The group said the trend towards wireless technology and email was also hitting its business.

Celestica posted weaker end of year results for 2002 than in 2001 but said it was starting to see signs of recovery.