Analysts have been lowering their outlook for profits in 2019 (Johannes EISELE)

New York (AFP) – Wall Street stocks rose again on Monday, extending the January rally, despite rising expectations that US corporate earnings will be weak for at least the first half of 2019.

Large technology companies such as Apple and Facebook were among the standouts in a low-key session. Earlier, European and Asian shares were mixed, while Shanghai was closed for the Lunar New Year holiday this week.

The gains in the United States followed the Dow’s best January in 30 years.

“The market has certainly found the path of least resistance higher,” Art Hogan, chief market strategist at National, said of the market’s drift upward in the wake of a blowout January.

Key drivers for the rally include reassurances from the Federal Reserve of a cautious approach to further interest rate hikes, positive commentary by Beijing and Washington on trade talks and a solid earnings season, Hogan said.

– Earnings recession? –

Although fourth-quarter earnings have generally bested expectations, analysts have been lowering their outlook for profits in 2019.

Some analysts believe US companies could be on the cusp of a so-called “earnings recession” in the first half of 2019, amid reticence over trade wars, the hangover from the partial government shutdown and uncertainty over how Brexit will play out.

An earnings recession is defined as a decline in profits for two quarters in a row.

Wall Street analysts now expect S&P 500 companies’ earnings per share fall 4.1 percent in the first quarter, according to FactSet.

The forecast means “we’re halfway to an earnings recession,” said DataTrek Research’s Nicholas Colas, adding that second-quarter estimates “are still coming down as well.”

Markets have already baked in a weak first half of 2019 in earnings, a negative offset by expectations for a US-China trade deal, which needs to “successfully conclude (the sooner the better) to give markets hope that Q3/Q4 2019 is the turning point,” Colas said.

Key earnings this week include Disney, General Motors and Eli Lilly, while the economic calendar features the monthly Institute for Supply Management survey on the services sector, and the delayed US trade balance for November, held up due to the five-week government shutdown.

After Wall Street closed, Google parent Alphabet reported a profit of $8.9 billion in the fourth quarter on revenue that was up 22 percent to $39.3 billion from the same period a year earlier.

But shares slipped 3.3 percent in after-hours trading, with investors apparently focused on rising costs at the technology giant.

– Key figures around 2140 GMT –

New York – Dow: UP 0.7 percent at 25,239.37 (close)

New York – S&P 500: UP 0.6 percent at 2,724.87 (close)

New York – Nasdaq: UP 1.2 percent at 7,347.54 (close)

London – FTSE 100: UP 0.2 percent at 7,034.13 (close)

Frankfurt – DAX 30: FLAT at 11,176.58 (close)

Paris – CAC 40: DOWN 0.4 percent at 5,000.19 (close)

EURO STOXX 50: DOWN 0.2 percent at 3,165.20 (close)

Tokyo – Nikkei 225: UP 0.5 percent at 29,883.77 (close)

Hong Kong – Hang Seng: UP 0.2 percent at 27,990.21 (close)

Shanghai – Composite: Closed for a public holiday

Pound/dollar: DOWN at $1.3041 from $1.3079 at 2200 GMT Friday

Euro/pound: DOWN at 87.68 pence from 87.57 pence

Euro/dollar: DOWN at $1.1435 from $1.1456

Dollar/yen: UP at 109.92 yen from 109.50

Oil – Brent Crude: DOWN 24 cents at $62.51 per barrel

Oil – West Texas Intermediate: DOWN 70 cents at $54.56 per barrel

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